Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Use Countercyclical Capital Buffers
Episode 44 of Monetary Policy Explained unpacks the countercyclical capital buffer (CCyB), a macroprudential tool that central banks use to cool credit markets during booms and release capital during downturns. Lucas and Luna walk through how the Bank of England activated its CCyB in 2025, raising it to 2 percent to dampen a commercial real estate lending surge, and how the European Central Bank followed suit in early 2026. They explain the mechanics—banks must hold extra common equity Tier 1 capital when the CCyB is positive—and contrast it with tools like loan-to-value caps covered in…
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