BNB Sets Countercyclical Buffer at 1% for Fourth Quarter of 2020
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.
Related Links (in Bulgarian)
Keywords: Europe, EU, Bulgaria, Banking, CCyB, Basel III, Regulatory Capital, BNB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
CFPB Launches American Consumer Financial Innovation NetworkRelated Articles
BoE Clarifies Approach to Treatment of Payment Holidays on Form PL
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
BoE Provides Reporting Update on Form AS and Form FV
BoE updated the known issues document for the statistical reporting Forms AS and FV.
FED Announces Capital Requirements for Large Banks
FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.
SRB Publishes Guidance on Implementation of Bail-In Tool
SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.
BIS Publishes Update on G20 TechSprint Initiative
BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.
OSFI Provides Update on Implementation of IFRS 17 in Canada
OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.
EBA Provides Clarity on Implementation of Guidance on COVID Reporting
EBA updated the report on the implementation of selected COVID-19 policies.
FSI Note Discusses Challenges Associated with COVID Relief Measures
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
BCBS Consults on Principles for Operational Risk and Resilience
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
BoE Updates Template and Definitions for Form ER
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.
