Česká národní banka

CNB > Financial stability > Macroprudential policy > Sources of systemic risk

Sources of systemic risk, transmission mechanisms and macroprudential instruments

Sources of systemic risk and macroprudential instruments

Systemic Risk: Excessive credit growth and leverage Excessive maturity mismatch and market illiquidity Exposure concentrations Misaligned incentives
Key instruments Counter-cyclical capital buffer Capital instruments:
- leverage ratio
- by sector (real estate, intra-financial)
- systemic risk buffer
Loan-to-value / loan-to-income caps Stable funding restrictions (e.g., NSFR, LTD) Liquidity charges Large exposure restrictions (by counterparty, sector, geographic) SIFI capital surcharges (G- SII and O-SII buffer) Systemic risk buffer
Transmission channels Resilience of banks; contribute to curbing excessive (sectoral) credit growth Resilience of borrowers and banks, mitigate pro-cyclicality mortgage credit Resilience of funding base to stressed outflows Resilience to counterparty and concentration to sectors Lower probability and impact of failure of SIFIs; increased resilience of banks

Source: ESRB ( Flagship Report on Macro-prudential Policy in the Banking Sector, Table 3 (external link) )