I shall now describe these tools distinguishing, for the purpose of my address, between those that affect the capital requirements on credit institutions and those that fall on borrowers. Macroprudential tools that affect the capital requirements on credit institutions The banking regulations in force require banks to have sufficient capital set aside to cover unexpected losses and to maintain their solvency in the event of a crisis. The amount of capital required depends on the risk linked to a specific bank’s assets and, in fact, is expressed as a percentage of risk-weighted assets. The concept of risk-weighted assets basically means that a lower capital allocation is attributed to the safest assets, while the riskiest assets are assigned a greater risk weighting. In other words, the riskier assets are, the more capital the bank will have to hold in reserve. In parallel, specific grades are assigned to capital, depending on its quality and on risk.4 First among the macroprudential tools made available to the authorities is the possibility of directly influencing credit institutions’ capital by means of requirements additional to the traditional microprudential capital requirements. This greater requirement of capital increases banks’ loss-absorption capacity and, moreover, influences their appetite for risk, given that the losses that shareholders must bear in the event of difficulty (“skin in the game”) increase as a result. If they are to function correctly, these additional capital requirements must be activated when banks begin to build up risks, and they must be drawn down when risks abate or when they materialise.

This should lead us to reflect on how we can increase the macroprudential space available, thereby extending the capacity to mitigate the effects of future crises, both those originating in macrofinancial disequilibria that are endogenous in the economy and those arising from factors exogenous to the financial sector. Some national authorities, in countries such as the United Kingdom, have added flexibility to the implementation of the original CCyB framework developed by the BCBS to require the accumulation of a countercyclical capital buffer in the absence of warnings about systemic imbalances based on the credit-to-GDP gap metric. It would suffice for the economy not to be in a recessionary environment to call for a positive CCyB that can be released when any shock leading GDP to stand below its potential should materialise. Events surrounding the COVID-19 shock, from a source completely external to the financial system, have demonstrated the goodness of this approach in the use of the CCyB. This discussion has a bearing on other matters, such as the optimum level of capital that banks should maintain, and the most suitable composition of this capital: structural requirements versus cyclical/releasable requirements, microprudential requirements versus macroprudential requirements, and discretionality versus rules. It is, therefore, a complex discussion requiring detailed analyses well-grounded in empirical and theoretical evidence. Second, I would like to stress that we must also reflect in the coming years on the development of macroprudential policy for the so-called “non-bank segment” of the financial system, i.e. in the area of securities markets and insurance companies.