Articles on the economy
Capital buffer requirements imposed on banks are among the most important instruments available in the macroprudential policy toolkit. They protect the ability of banks to withstand losses and provide credit during severe economic and financial crises.
In Finland, it should be possible to impose a countercyclical capital buffer requirement on banks before the credit cycle overheats. This would allow the authorities, as necessary, to lower the capital requirements for banks during a crisis situation on a more flexible basis than at present.
In order to prevent crises, authorities should have a more flexible range of means at their disposal to strengthen banks’ risk resilience and contain excessive growth in credit and household indebtedness.
The systemic risk buffer is an additional capital requirement that can bolster Finland’s structurally vulnerable banking sector.
A range of instruments could be deployed to restrain dangerous growth in lending for house purchase and household debt.
The authorities should be equipped with new tools for ensuring the banking sector’s capital adequacy and preventing overheating on the housing market.