April 09, 2019

ESRB updated the list of countercyclical capital buffer (CCyB) rates applicable in countries in the Eurosystem. As per the update, the CCyB for Iceland will increase to 2%, with effect from February 01, 2020. The table also contains the CCyB rates that have been announced, but not yet implemented, by the designated authorities. Certain small and medium-size investment firms are exempt from holding a CCyB in several countries, including Croatia, Cyprus, Luxembourg, Malta, Poland, Slovakia, Sweden, and the United Kingdom.

As part of the information accompanying the announcement, designated authorities must notify ESRB about each quarterly setting of CCyB rates. CCyB is part of a set of macro-prudential instruments, designed to help counter procyclicality in the financial system. Capital should be accumulated when cyclical systemic risk is judged to be increasing, creating buffers that increase the resilience of the banking sector during periods of stress when losses materialize. This will help maintain the supply of credit and dampen the downswing of the financial cycle. A CCyB can also help dampen excessive credit growth during the upswing of the financial cycle.

 

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Keywords: Europe, EU, Banking, CCyB, Capital Buffer, Macro-Prudential Instrument, Systemic Risk, ESRB

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