A Building Block Approach for Introducing a Positive Neutral Countercyclical Capital Buffer in Albania
December 29, 2025
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The paper discusses the introduction of a positive neutral countercyclical capital buffer (CCyB) for Albania. The building blocks present a step-by-step guide to assess preconditions to be in place. Applied to the case of Albania, authors employ a set of methods for the calibration of a positive neutral rate, including a quantile local projection and stress-test based approach. The paper (i) finds a positive neutral CCyB regime is feasible and net beneficial for Albania, (ii) identifies the adequate range of the positive neutral rate between 100-200bps, and (iii) provides a template for emerging markets to explore positive neutral CCyB regimes.
Subject: Bank soundness, Capital adequacy requirements, Commercial banks, Countercyclical capital buffers, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Stress testing
Keywords: Bank soundness, Capital adequacy requirements, Commercial banks, countercyclical capital buffer, Countercyclical capital buffers, local projection, macroprudential policy, releasable capital buffer, stress test, Stress testing
Pages:
23
Volume:
2025
DOI:
Issue:
154
Series:
Selected Issues Paper No. 2025/154
Stock No:
SIPEA2025154
ISBN:
9798229035132
ISSN:
2958-7875
