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    BNB Sets Countercyclical Buffer at 1% for Fourth Quarter of 2020

    September 17, 2019

    BNB has set the countercyclical capital buffer, or CCyB, rate applicable to credit risk exposures to 1% for the fourth quarter of 2020. The BNB Governing Council will decide on the level applicable in the first quarter of 2021 in December 2019. The level of the countercyclical buffer applicable to credit risk exposures in the Republic of Bulgaria will remain 0% until the end of the third quarter of 2019, will be 0.5% for the fourth quarter of 2019 and the first quarter of 2020, and will increase to 1% for April-September 2020. Maintaining a countercyclical capital buffer in times of favorable economic conditions can help to preserve and further strengthen the capital position of the banking system, thus enhancing the resilience of credit institutions to future credit risk realization.

    According to Article 5, paragraph 3 of the BNB Ordinance No. 8, the reference indicator of article 5, paragraph 1; the relevant guidance from ESRB; and the other indicators that BNB has considered appropriate to reflect cyclical systemic risk are considered in the determination of the level of the countercyclical buffer. As of the end of the second quarter of 2019, the credit or GDP ratio amounts to 95.3%. The deviation of the indicator from the long-term trend is negative by 41.0%, which corresponds to the zero value of the anti-cyclical buffer benchmark. Lending activity in the housing and consumer loans segment remains high. In periods of enhanced lending, it may be possible to begin gradually accumulating cyclical risks that occur if borrowers' ability to service their debt weakens in the event of a future decline in economic activity and an increase in interest rates on loans. 

     

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    Keywords: Europe, EU, Bulgaria, Banking, CCyB, Basel III, Regulatory Capital, BNB

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