Include bibliographical references (P: 34-40)

Executive Summary -- 1. Introduction -- 2. Lack of Buffers ahead of the COVID-19 Crisis -- 3. Positive Neutral Capital Buffers: Benefits and Costs -- A. Benefits of Releasable Capital—Evidence -- B. Costs of Building Buffers -- 4. How Would the Overall Framework Operate? -- A. When to Release Buffers? -- B. When and at What Pace Would Buffers Be Built? -- C. What Level for the Positive Neutral Rate? -- D. When to Increase the Countercyclical Capital Buffer Beyond the Neutral Level? -- E. Assessing and Addressing Leakage Effects -- 5. Considering the Relationship with Other Capital Requirements -- A. Provisioning and Dividend Restrictions as a Complement to Capital Buffer Requirements -- B. The Countercyclical Capital Buffer and Alternative Releasable Buffers -- C. The Relationship between the Countercyclical Capital Buffer and the Capital Conservation Buffer -- D. Neutral Countercyclical Capital Buffer and Bank-Specific Buffers Driven by Stress Tests -- E. Neutral Countercyclical Capital Buffer and Leverage or Resolution Requirements -- 6. Conclusion -- Annex

"Growing experience since the global financial crisis suggests that there is benefit to both advanced and emerging economies from having releasable capital buffers. Building such buffers in normal times enables policymakers to support lending in the face of shocks irrespective of whether stress was preceded by excessive credit growth. We explore key issues arising in operating such a framework, including when, and to what levels, buffers should be built, when they should be released, and how a release should be communicated to support the supply of credit to the economy. Finally, we examine complementary mechanisms to address procyclicality in banks’ loan supply, including buffers that protect against sectoral risks, bank-specific buffers based on stress tests, and provisioning requirements". (Pub;isher page)