Hence, even prior to activation of the countercyclical capital buffer in Germany, German banks had countercyclical capital buffers of approximately 0.07% of risk weighted assets as a result of their cross-border exposures to countries that had activated the CCyB earlier. In cases where reciprocity is recommended but not mandatory, there is a “comply or explain” procedure at the ESRB.
In sum, macroprudential policymaking in Europe is embedded in a complex set of institutional arrangements, ensuring coordination between national institutions and countries. As the system has not been tested over a full financial cycle, it is certainly too early to tell whether these institutional arrangements help to overcome the inaction bias inherent in macroprudential policy and whether they improve the surveillance of systemic risks.