Rosanna Costa: Macroprudential policy and the countercyclical buffer Opening remarks by Ms Rosanna Costa, Governor of the Central Bank of Chile, at the workshop "Macroprudential policy and the CCyB", Santiago de Chile, 16 December 2022. *** Good morning. I am pleased to welcome everyone to today's workshop on macroprudential policy and the countercyclical buffer. Thank you for being here, participating and lending your attention to this important topic. We have gathered a great lineup of speakers, who will address a range of timely and important issues on the matter. In the aftermath of the global financial crisis, banking regulators agreed on an updated set of banking regulations aimed at improving the resilience of the global financial system, highlighting among them the role of new buffers intended to help banks build sufficient resources in normal times so that in a period of stress they can absorb losses and avoid a disruptive reduction of lending. The buffers have two objectives (Basel Committee, 2020b): first, to ensure that banks absorb losses in times of stress without breaching their minimum requirements; and second, to keep credit flowing to the real economy in a downturn by lending to creditworthy businesses and households. In December 2010, the Basel Committee on Banking Supervision (BCBS) published the Basel III framework with the global regulatory standards on bank capital adequacy and liquidity, including a countercyclical capital buffer (CCyB). Its primary objective would be to protect the banking sector from periods of excessive aggregate credit growth, often associated with the accumulation of systemic risk.
If we are to believe the cliché, 'regulation' and 'innovation' are incompatible. On the contrary! Regulation without innovation would just be sterile conservatism, while innovation without regulation and financial stability would be devoid of the trust that is the sine qua non of sustainability. So, to accompany you as you eat your lunch, I'm going to combine these two ingredients, first as part of a hearty main course on the lessons of the crises of 2023 (I), followed by a slightly newer and more forward-looking recipe for the digitalisation of currency and payments (II). I. 2023, illustration of the virtues of regulation The events of 2023 have served as a reminder of the fundamental need for a regulatory framework. Page 2 of 6 The first warning came in the banking sector. Despite the shock waves emanating from the United States and then Switzerland, the banking crisis has not affected the euro area or France in particular, even though we remain on our guard. There is a good reason for this solidity: more solid fundamentals, but above all two inseparable pillars - effective regulation, coupled with proactive supervision. Basel III regulations apply in full to all European banks, but only to 13 banks in the United States. Therefore, the priority is not to keep reworking Basel III requirements – and delaying their application – but to apply them everywhere and as quickly as possible. In a nutshell, more Basel III now, rather than some hypothetical delayed Basel IV.