CNB leaves countercyclical capital buffer rate at 0.5%

The CNB Bank Board has decided to leave the countercyclical capital buffer rate for exposures located in the Czech Republic at 0.5%.

The countercyclical capital buffer was introduced as an important macroprudential policy instrument within the European Union in 2014. 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 creates systemic risks and increases the potential for sharp fluctuations in economic activity.

The CNB Bank Board approved the setting of the countercyclical capital buffer rate at its meeting on 16 March 2017. 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/2017.

Marek Zeman
Director, CNB Communications Division

Additional information:

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”. The CNB increased this rate from zero for the first time in December 2015, with effect from 1 January 2017.

Banks, credit unions and investment firms should create such a buffer on the basis of instructions from the regulatory authority at times of excessive credit growth, which are usually characterised by rising financial imbalances and accumulating systemic risk as a result of strong credit expansion. By contrast, the buffer should be released and used by banks as a capital buffer to cover losses at times of economic downturn accompanied by rising loan losses. This is aimed at preventing a credit crunch and transmission of an additional shock from the financial sector to the real economy.

More information about the countercyclical capital buffer is available on the CNB website at:
/en/financial-stability/macroprudential-policy/the-countercyclical-capital-buffer/

Information about the setting of the countercyclical capital buffer in other European countries is available on the website of the European Systemic Risk Board at:
https://www.esrb.europa.eu/national_policy/ccb/applicable/html/index.en.html

The Czech National Bank is the central bank of the Czech Republic and the supervisor of the Czech financial market. The primary objective of the CNB is to maintain price stability. The CNB sets monetary policy, issues banknotes and coins, manages the circulation of currency, the payment system and settlements between banks, and performs foreign exchange supervision. It also performs supervision of the banking sector, the capital market, the insurance industry, pension funds, credit unions, non-bank consumer credit providers, electronic money institutions and consumer protection.