The Belgian central bank NBB has decided to maintain the countercyclical buffer (CCyB) rate for credit risk exposures to the Belgian private non-financial sector at 0% for the fourth quarter of 2020. Based on current projections and risk assessments, NBB expects not to increase the CCyB at least until the third quarter of 2021. However, NBB plans to review the situation on a quarterly basis.
CCyB is a macroprudential instrument designed to mitigate cyclical systemic risk and to counter pro-cyclicality in lending. Its objective is to support the sustainable provision of credit through the cycle by strengthening the resilience of banks.
Capital buffers are imposed whenever there is an increase in cyclical systemic risks (that is, with excessive growth in lending), so that these additional requirements can be relaxed when the cycle turns and the risks start to decline. If risks emerge in a situation of financial stress, a decision can be taken to release the buffer instantly to put banks in a better position to absorb losses and keep up their level of lending when the economic and financial environment is vulnerable. CCyB rate, expressed as a percentage of risk-weighted assets of banks, is generally between 0.0% and 2.5%, but can be set higher when justified by the underlying risk. Given the significant challenges the global economy is now facing, NBB had announced, on March11, 2020, the full release of CCyB.
Keywords: Europe, EU, Belgium, Banking, CCyB, Macro-Prudential Policy, Systemic Risk, Basel, Regulatory Capital, NBB
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