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Bank valuation and macroprudential capital buffers

Working paper 864
Working Papers
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Published: 02 July 2026

By: Eric Cuijpers

How do unexpected changes in macroprudential capital buffer requirements impact bank valuation, measured by price-to-book ratios? This study addresses this question by constructing macroprudential capital buffer ”surprises” from market reactions to buffer announcements and estimating their effects, using panel local projections, on the price-to-book ratios of a panel of large European banks. The analysis shows that unexpected buffer surprises are associated with a short-run decline in price-to-book ra-tios, followed by a sustained increase in the weeks following the announcement. Such an increase is consistent with market recognition of reduced risk, despite higher buffer requirements that could lower distributable resources, suggesting that the risk channel dominates the payout channel in the valuation of large European banks.

Keywords: Capital regulation; Macroprudential policy; Bank valuation
JEL codes G21; G28; G32

Working paper no. 864

864 - Bank valuation and macroprudential capital buffers

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Research highlights: 

  • Using market-based macroprudential buffer surprises, this study establishes the effect of macroprudential capital buffer requirements on bank valuation.   

  • Unexpected buffer tightening leads to a short run decline in bank valuation, followed by a persistent increase of bank valuation over subsequent weeks.  

  • Such an increase is consistent with investor recognition of reduced risk offsetting any reduction of distributable resources. 

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