Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
Why Central Banks Care About Your Bank's Capital Ratio
In Episode 161 of Monetary Policy Explained, Lucas and Luna dig into a number that quietly decides how much central banks can push on the economy: the capital ratio. While most attention goes to interest rates and bond purchases, banks' capital buffers are what keep the lending channel alive when stress hits. The hosts walk through a real stress-testing exercise from 2025, explain what a CET1 ratio actually means, and why central banks now lean on bank capital as a macroprudential tool. You'll hear why a seemingly boring regulatory metric became a front-line policy instrument during…
The skinny
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