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Home > QFINANCE Dictionary > Definition of procyclicality

Definition of

procyclicality

Economics

positive feedback in linked factors a pattern of positive reinforcement in the behavior of linked factors that can intensify fluctuations in a system. For example, credit expands as the financial climate improves, but in a subsequent period of economic contraction credit shrinks and financial constraint increases

procyclicality - Related Articles
  • Revising Basel II—But at What Cost?

    Best Practice

    in the system. There is also concern that the existing Basel II requirements are too pro-cyclical to continue to act as the blueprint for bank regulatory capital guidance, without some revision. This is not a new insight. A number of senior figures in the industry have long been concerned that the models behind
    By Vishal Vedi

  • Tripping over Prudence—Ideas for a Sensible Fix for Basel II

    Best Practice

    One of the issues here is that Basel II mandates that banks raise capital or cut lending as their risks are perceived to increase. That this is pro-cyclical is a point that has been made many times. It constrains banks precisely when a cure for the global predicament is for them to lend (reasonably
    By Samuel Sender, Noel Amenc

  • Solutions to the Current Crisis

    Viewpoints

    To be specific in terms of avenues for reform, there are three areas where change is particularly needed: 1) short-termism, 2) pro-cyclicality, and 3) transparency. I believe that shortcomings in these areas were instrumental in creating the conditions for this crisis and for amplifying its severity.
    By Jean-Claude Trichet

  • Basel III: Uncharted Territory

    Viewpoints

    Committee on Banking Supervision, 2010). It is designed to cope with the procyclicality which many now see as one of the most dangerous flaws of the old regime.
    By Sir Howard Davies

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Definitions of ’procyclicality’ and meaning of ’procyclicality’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’procyclicality’ and other financial terms with our online QFINANCE Financial Dictionary.

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