CNB leaves countercyclical capital buffer rate at 1.25%

The CNB Bank Board has decided to leave the countercyclical capital buffer rate for exposures located in the Czech Republic at 1.25%.

The CNB Bank Board decided to leave the rate for exposures located in the Czech Republic at the current level at its meeting on 8 March 2018. The CNB used this rate for the first time at the end of 2015, setting it at 0.5% with effect from 1 January 2017. The Bank Board decided to raise it to 1.0% in May 2017 with effect from 1 July 2018. The latest change in the rate occurred on 6 December 2017, when the Bank Board decided to increase it further to 1.25% with effect from 1 January 2019.

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/2018.

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.