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
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA Publishes Report on Asset Encumbrance of Banks in EU
EBA published the annual report on asset encumbrance of banks in EU.
MAS Revises Guidelines on Technology Risk Management
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA Proposes Guidelines for Establishing Intermediate Parent Entities
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.