Scant use of capital buffers during the pandemic: Potential stigma effect

Scant use of capital buffers during the pandemic: Potential stigma effect

Fecha: septiembre 2021

Javier Restoy and Ángel Berges

Capital Buffers

SEFO, Spanish and International Economic & Financial Outlook, V. 10 N.º 5 (september 2021)

In order to alleviate the pressure wrought by COVID-19 on the banking sector, regulators and supervisors permitted banks to utilise capital buffers prescribed under Basel III, including the so-called counter-cyclical buffer and the capital conservation buffer. Econometric analysis shows that the ‘stigma effect’ most likely explains banks’ hesitancy to take advantage of this flexibility.

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