Natalia Tente, 21 April 2015

The Basel III countercyclical capital buffer framework obliges nations to set appropriate capital buffer rates for their bank’s credit exposure at home and in third countries. This column proposes criteria for selecting these third countries. The idea is to focus only on the third-country exposures that, firstly, could jeopardise stability of the domestic banking sector and, secondly, can be actually addressed by means of the policy. Variables and thresholds to operationalise this idea are proposed.

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