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CNB > Media service > Press releases of the CNB > 2017 > CNB increases countercyclical capital buffer rate to 1.25%

CNB increases countercyclical capital buffer rate to 1.25%

18 Dec 2017

The CNB Bank Board has decided to increase the countercyclical capital buffer rate to 1.25%. The decision is effective from 1 January 2019.

The CNB Bank Board approved the new rate for exposures located in the Czech Republic at its meeting on 6 December 2017. “A number of factors spoke in favour of the increase. Rapid growth in bank loans, especially loans to households for house purchase and consumption, is continuing,” explained Vice-Governor Vladimír Tomšík. “This buffer is aimed not at stopping lending, but at creating a buffer for worse times in the current good times,” he added.

The countercyclical capital buffer was introduced as an important macroprudential policy instrument in the European Union in 2014. Obliged institutions are required to create this buffer on the basis of the regulator’s instructions in periods of excessive growth in lending. Excessive lending growth usually increases financial imbalances and leads to a rise in systemic risk. By contrast, at times of falling economic activity, accompanied by rising credit losses, this buffer should be released so that non-financial corporations and households continue to have access to loans without excessively tight conditions.

The CNB increased the rate from zero for the first time in December 2015, with effect from 1 January 2017. The Bank Board decided to raise it further to 1.0% in June 2017, with effect from 1 July 2018.

More details on this decision are available in the Provision of a general nature on setting the countercyclical capital buffer rate for the Czech Republic IV/2017.

Marek Zeman
Director, CNB Communications Division


Notes for journalists:

The countercyclical capital buffer is set in the Czech Republic by the Czech National Bank on a quarterly basis in a document entitled Provision of a general nature on setting the countercyclical capital buffer rate. It is intended to protect the banking sector against risks arising from its behaviour over the financial cycle, in particular excessive growth in lending, which contributes to the build-up of systemic risks and increases the potential for sharp fluctuations in economic activity.