CNB increases countercyclical capital buffer rate to 2.5%

The Czech National Bank further increases the countercyclical capital buffer rate for exposures located in the Czech Republic to 2.5%.

The Bank Board decided today to increase the rate to 2.5% from 1 April 2023. When making its decision, it took into account the current position of the Czech economy in the financial cycle, the credit risks accumulated in the banking sector’s balance sheet and banking sector vulnerability. It also took into consideration the appreciable growth in geopolitical uncertainty, which is creating potential for increased and faster materialisation of the cyclical risks accumulated in the financial system.

A countercyclical capital buffer rate of 0.50% is currently applied. Its changes are usually announced a year in advance. The Bank Board decided earlier that a rate of 1% would be applied from 1 July 2022. A rate of 1.5% will be applied from 1 October 2022. From 1 January 2023 to 31 March 2023, the CNB will require banks to apply a countercyclical capital buffer rate of 2%.

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.

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 I/2022, which will be published on 11 March 2022.

Markéta Fišerová
Director of the CNB Communications Division and CNB Spokesperson

• 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 over the financial cycle. These include in particular risks stemming from excessive growth in lending, which contributes to the build-up of systemic risks and increases the potential for sharp fluctuations in economic activity.
• More information about the countercyclical capital buffer on the CNB website
• Information about the setting of the countercyclical capital buffer in other European countries on the website of the European Systemic Risk Board (external link)