In other words, according to this criterion, the CCyB should be used to build up resilience among banks against the reversals that typically follow periods of 4/11  credit exuberance. Thus, the idea is to protect banks against the risk of failure in a similar way as under the traditional microprudential approach to capital regulation. However, the BCBS immediately added a second goal: Due to its countercyclical nature, the countercyclical capital buffer regime may also help to lean against the build-up phase of the credit cycle in the first place. This is a more ambitious goal. It means actively combating excessive credit growth, aiming to curb the development of a credit cycle boom. Moreover, a third goal is also referred to by the BCBS, this time connected to economic contraction phases: In downturns, the regime should help to reduce the risk that the supply of credit will be constrained by regulatory capital requirements that could undermine the performance of the real economy and result in additional credit losses in the banking system. In fact, this objective closely follows the original 2009 G-20 recommendations to mitigate procyclicality, including a requirement for banks to build buffers of resources in good times that they can draw down when conditions deteriorate. Under this third objective, the CCyB should also be helping banks withstand the capital implications of an economic contraction (lower profits, higher defaults, and prospectively higher PDs and LGDs) without tightening the capital constraints to the extent that the credit supply and hence the real economy is damaged.

Within its macroprudential mandate, the ECB will contribute to this end. Despite the potential for monetary policy to influence economic growth in the short term, strong, sustainable and balanced growth requires other policymakers to assume their responsibilities. From a global perspective, one of the key ingredients for raising potential growth and productivity is openness. Open trade, investment and sustainable financial flows play a key role in the crossborder diffusion of new technologies that drive forward efficiency improvements. Preserving openness is thus key to strengthening global growth potential. It should be underpinned by effective multilateral cooperation, including in the field of financial regulation and supervision. As regards the euro area, strengthening its long-term growth potential calls for decisive action to address the remaining structural issues. Reform implementation needs to be substantially stepped up, with further actions to improve the business and regulatory environment aimed at boosting investment and increasing productivity. Labour market rigidities need to be reduced further to enhance job creation and reduce unemployment, especially for young people. To foster reform implementation at country level, a full and consistent application of the EU’s policy framework is required, including the European Semester and the macroeconomic imbalance procedure. Likewise, full and consistent implementation of the Stability and Growth Pact remains crucial to ensure confidence in the EU’s fiscal framework and to safeguard public debt sustainability. In the current environment, a broadly neutral euro area fiscal stance strikes an appropriate balance between aggregate stabilisation and sustainability needs.