How can Finland’s use of the countercyclical capital buffer requirement be further developed?

Abstract

Finland’s application of the countercyclical capital buffer (CCyB) requirement could support bank lending in a more flexible manner than at present in situations where an external shock to the financial system poses a serious threat to the functioning of the credit market. This could involve, for example, setting the buffer requirement above zero already at the neutral phase of the credit cycle, which could be carried out in a variety of ways but would necessitate regulatory changes.