4  Tier 1 capital is taken to be capital intended to ensure operational continuity. This capital enables a bank to pursue its activities and maintain its solvency. The highest-quality tier 1 capital is called common equity tier 1 (CET1). Tier 2 capital is considered to be capital intended to absorb losses in the event of liquidation. This capital allows a bank to reimburse depositors and preferential creditors in the event of its insolvency. 7  In short, when a macroprudential capital buffer is activated or increased, banks5 might consider the following options to comply with these new requirements: a) increase the net interest income arising on customer charges, generate more profits and retain a portion of them; b) maintain profits, but reduce dividend payments; c) issue new shares and raise additional funds, or d) reduce risk-weighted assets. The first three alternatives would tend to exert upward pressure on the interest rates on loans granted by banks. These higher interest rates mean that fund-seekers will resort to a lesser extent to financing in their spending decisions, whereby the volume of lending and, therefore, the risks borne by the financial system will diminish. Moreover, this increase in interest rates will reduce household consumption, and firms will also invest less, which will further reduce the demand for credit. In parallel, real and financial asset prices will adjust downwards, reducing the value of the collateral for credit transactions.
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