NBB announced its plans to increase the countercyclical buffer (CCyB) rate for credit risk exposures to the Belgian private non-financial sector from 0% to 0.5% for the third quarter of 2019. This decision is subject to a one-year implementation period, which means that the CCyB rate of 0.5% will become binding from July 01, 2020.
CCyB is a temporary buffer that is built during the upward phase of the credit cycle to ensure sufficient absorption capacity for banks to have sufficient margin to cover credit losses during the downward phase of the cycle. The activation of CCyB by NBB is purely preventive, in line with the principles of the macro-prudential policy. In view of the acceleration of the Belgian credit cycle for the private non-financial sector, a precautionary and gradual buildup of CCyB is justified to ensure sufficient resilience in the Belgian banking sector, to secure the necessary absorption capacity for potential credit losses and to safeguard the continuity of credit supply to the Belgian economy going forward. These buffers will be immediately released in the event of a financial shock. Should cyclical systemic risks decrease and the credit cycle turn, these additional buffer requirements will be relaxed toward a 0% neutral level, commensurate with the cycle.
The measure entails the buildup of an additional (countercyclical) buffer of approximately EUR 1 billion for the Belgian banking sector. Given the current solvency position of Belgian banks and the imposition of a relatively limited 0.5 % buffer rate, this measure should not disrupt credit pricing or credit availability to the Belgian economy. NBB has adopted this measure as a precaution in light of an accelerating credit cycle. However, NBB is also taking due account of the current economic uncertainty. In this context, NBB stands ready to withdraw the measure if a significantly negative and persistent shock were to occur during its phase-in period, to avoid any procyclical effects of the measure.
Keywords: Europe, Belgium, Banking, CCyB, Systemic Risk, Credit Risk, Macro-Prudential Policy, NBB
Previous ArticleBoM Updates Guideline for Write-Off of Non-Performing Assets
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.
FED released hypothetical scenarios for a second round of stress tests for banks.
PRA published updates in relation to the 2021 Supervisory Benchmarking Portfolio exercise.
FED adopted a proposal to extend for three years, with revision, the capital assessments and stress testing reports (FR Y-14A/Q/M; OMB No. 7100-0341).
HKMA revised the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.