Building up the CCyB is appropriate as long as cyclical risks are rising and the increase of the buffer is unlikely to trigger procyclical effects itself. If the cyclical systemic risks ease off, the buffer can be reduced again. The second – and related – aspect is the way the CCyB can mitigate deleveraging and help stabilize credit supply in bad times.
This important feature of the CCyB is rooted in the fact that macroprudential buffers perform a function that is fundamentally different to that of microprudential minimum capital requirements: Minimum capital requirements must be met at all times. Weaker capitalization directly results in measures ranging from supervisory action to the withdrawal of a banking licence. By contrast, macroprudential buffers can provided some “breathing” space.