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 ArticlePRA Releases New and Updated Versions of PRA 110 LMM Tool
OSFI proposed revisions to the Basel Capital Adequacy Reporting (BCAR) and leverage requirements returns for the 2023 reporting, with the comment period ending on July 09, 2021.
EBA published a discussion paper on review of the standardized nonperforming loans (NPL) transaction data templates, along with the proposed revised NPL data templates.
Bundesbank updated AnaCredit reporting requirements for banks, with reference to the Notice 8001/2020.
CBUAE has issued a regulation that introduces the licensing and supervision framework for low-risk, specialized banks.
APRA is consulting on CPG 511—the draft Prudential Practice Guide on remuneration for banks, insurers, and superannuation licensees—with the comment period ending on July 23, 2021.
MAS announced a new RegTech grant scheme and an enhancement of the Digital Acceleration Grant (DAG) scheme to accelerate technology adoption in the financial sector.
PRA published a letter that sets out findings from the 2020 Internal Audit Review of the Collections function of a sample of non-systemic banks and building societies.
EIOPA launched a consultation on the Interbank Offered Rate (IBOR) transitions, in context of the EU Benchmarks Regulation.
The Trustees of the IFRS Foundation proposed amendments to the Constitution of the IFRS Foundation to accommodate the potential formation of the new International Sustainability Standards Board within the governance structure of the organization.
BCB amended the resolution that establishes technical requirements and operational procedures for the implementation of open banking in Brazil, with the amended resolution entering into force on its publication date.