capital neutral at inception, but it would plausibly entail lower capital through the cycle. this debate has given rise to the concept of a positive neutral ccyb in normal times, first introduced by the bank of england in 2016. 12 this term refers to the introduction of a positive ccyb requirement level even in the absence of financial imbalances. since the outbreak of the pandemic, the debate has naturally gained ground in many institutions. indeed, the basel committee published last year a newsletter clarifying that the basel framework leaves open the possibility of introducing a positive neutral ccyb. 13 the ecb and the esrb have also reiterated their support for this approach. 14 indeed, many european countries have gradually adopted this new ccyb calibration approach in recent years, including croatia, cyprus, estonia, ireland, lithuania, the netherlands, norway and sweden. let me illustrate how a positive neutral ccyb can be set throughout the financial cycle. to this end, i will take as a reference the analytical framework described by de nederlandsche bank, 15 where four different phases associated with the degree of systemic risk are distinguished. first, the recovery phase, which is the one that follows a crisis, is a period of recovery of deteriorated balance sheets, both in the financial system and among households and businesses. in this phase, the ccyb is maintained at zero. second, in the normality phase, the balance sheet recovery is well under way and the ccyb is built up to reach the neutral level. third, in the phase of increased risk, when excessive developments in lending or asset prices lead to higher systemic risk, the ccyb should be raised above the neutral level. finally, in the materialisation phase, risk materialises and the ccyb is fully or partly released. obviously, not all these phases need to happen in the aforementioned stylised order. for example, the phase of increased risk could be curbed as a consequence of the increase in the ccyb above neutral levels or the use of other macroprudential tools. if that is the case, the ccyb could be progressively released to the neutral level. or, after reaching the neutral level, the economy could enter a recession abruptly, before vulnerability signals accumulate, thus entailing losses for the banking system. depending on the circumstances, a total or bank o f england. ( 2016 ). “ the financial po licy co mmittee ’

recovery in the provision of financial services to the real economy. moreover, bearing in mind that, through a number of different channels, financial conditions can be a major driver of the business cycle, the conduct of an active macroprudential policy will also generally help to temper the growth of nominal and real activity in boom phases and also their decline during downturns, which should moreover become less frequent. fo r example, banks ’ fulfilment o f these requirements at a given po int in time may no t prevent a credit - driven build - up o f aggregate macro eco no mic o r financial imbalances. internatio nal mo netary fund. ( 2013 ). “ key aspects o f macro prudential po licy ”. imf policy papers. hence, macroprudential policy can be conducive to a less volatile growth path and less hysteresis during crises. in this regard, macroprudential policy can be seen as a complement to monetary and fiscal policies with regard to their macroeconomic stability objective. the role of macroprudential policies in stabilising the economy might be particularly relevant in the european monetary union ( emu ), where a common monetary policy is shared by countries whose economic and financial cycles are still heterogeneous and where, in the absence of a common permanent fiscal capacity, national fiscal policy is left alone to counteract the negative consequences of idiosyncratic shocks or common shocks that generate different heterogeneous effects across member countries. looking ahead, this potential stabilisation role of macroprudential policy could be particularly relevant given the presence of high levels of structural public deficits and debt in many countries, which has significantly reduced the space available for fiscal policy to play its stabilisation role. the outbreak of the covid - 19 pandemic, when fiscal, monetary and macroprudential policies acted jointly to support the real economy, illustrates this stabilization role. however, macroprudential policy was constrained by the fact that the accumulated macroprudential buffers existing at its onset were small or non - existent in many jurisdictions, 3 given the precrisis context of very limited signs of any build - up of financial systemic risk. a stronger role of macroprudential policy to effectively address adverse shocks that occur independently of the financial cycle – as the covid crisis - will require, therefore, increasing the policy space generated by macroprudential