Financial Stability Committees and the Countercyclical Capital Buffer

37 Pages Posted: 18 Mar 2020

See all articles by Rochelle M. Edge

Rochelle M. Edge

Board of Governors of the Federal Reserve System

Nellie Liang

Brookings Institution

Date Written: March 18, 2020

Abstract

Multi-agency financial stability committees (FSCs) have grown dramatically since the global financial crisis. However, most cannot direct actions or recommend to other agencies that they take actions, and most would influence policy actions only through convening and discussing risks. We evaluate whether the significant variation in FSCs and other financial regulatory structures across countries affect decisions to use the countercyclical capital buffer (CCyB). After controlling for credit growth and the severity of the financial crisis, we find that countries with stronger FSCs are more likely to use the CCyB, especially relative to countries where a bank regulator or the central bank has the authority to set the CCyB. While the experience with the CCyB is still limited, these results are consistent with some countries creating FSCs with strong governance to take actions, but most countries instead creating weak FSCs without mechanisms to promote actions, consistent more with a symbolic political delegation motive and raising questions about accountability for financial stability.

Keywords: Financial stability committees, Bank regulators, Delegation, Macroprudential policy, Countercyclical capital buffer, Credit growth

JEL Classification: H11, G21, G28, P16

Suggested Citation

Edge, Rochelle M. and Liang, Nellie, Financial Stability Committees and the Countercyclical Capital Buffer (March 18, 2020). Available at SSRN: https://ssrn.com/abstract=3556505 or http://dx.doi.org/10.2139/ssrn.3556505

Rochelle M. Edge (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
(202) 452 2339 (Phone)
(202) 736-5638 (Fax)

Nellie Liang

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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