European Central Bank advises eurozone to increase capital buffers for financial stability

The European Central Bank stated in a declaration on Friday that given the current display of strong resilience in the banking sector, Eurozone countries should not reduce their releasable bank capital buffer requirements. Some countries should even consider increasing these capital buffers. This statement reflects the ECB's confidence in the banking system's robustness in the current economic environment, while also emphasizing the importance of maintaining or enhancing capital buffers to address potential future risks.

The ECB Governing Council explicitly supports national authorities' plans to raise capital buffer requirements, believing that this will help strengthen the stability of the financial system. The statement noted: "The Governing Council supports national authorities' plans to raise capital buffer requirements."

Additionally, the ECB stressed that in certain countries, further increasing releasable capital buffer requirements is necessary. This not only helps address vulnerabilities in the banking sector but also enhances the scope for macroprudential policy, thereby providing a greater buffer during economic fluctuations. The statement mentioned: "In some countries, further increasing releasable capital buffer requirements to address vulnerabilities and enhance macroprudential space remains desirable, as the current banking conditions limit procyclical risks."

Through this measure, the ECB aims to ensure that banks can maintain sufficient capital levels to cope with potential financial turmoil as the economic environment changes. Increasing capital buffers can not only enhance banks' risk resilience but also provide more stability during economic downturns, preventing a cascade of issues stemming from insufficient capital.