To limit credit growth during an economic boom and build resilience in the financial sector, a central bank's macroprudential committee decides to increase the countercyclical capital buffer (CCyB) requirement for commercial banks from 1.0% to 2.5%.
Which one of the following is the most likely direct economic effect of this regulatory action?
A reduction in the volume of credit extended to the private sector
An increase in the leverage (debt-to-equity ratio) of commercial banks
A decrease in the capital adequacy ratio of commercial banks
An expansion in the rate of broad money growth
18 exam-style questions on Edexcel A A Level Economics 4.4.3 Role of central banks. Each one has a worked solution and a mark scheme showing where the marks go.