medium · FRM Part 2 Operational Risk
In the context of macroprudential policy, a 'Type 2 error' regarding the Credit-to-GDP gap signal and the CCyB would be defined as:
- Releasing the CCyB too late in a crisis, causing a procyclical contraction in lending.
- Using the wrong GDP figure in the denominator, leading to an incorrect gap calculation.
- Activating the CCyB when no systemic crisis subsequently occurs, leading to unnecessary capital costs for banks.
- Failing to activate the CCyB ahead of a systemic banking crisis when the credit gap was actually signaling danger.
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