This article presents the CNB’s approach to setting the capital buffer for mitigating risks associated with institutions’ systemic importance in the CRD IV regulatory environment and describes the changes to that approach caused by the transposition of CRD V into Czech law. It also explains the reasons for the different approaches applied in the EU Member States before the transposition of CRD V and summarises the legislative measures taken to harmonise those approaches. Like several other national macroprudential authorities in Europe, the CNB was previously using the systemic risk buffer to mitigate risks associated with the systemic importance of institutions. The amended CRD does not allow authorities to apply this approach; from now on, they may only use the capital buffer for systemically important institutions for these purposes. As well as explaining the main principles of the CNB’s current approach to setting this buffer, the article shows its impact on the capital requirement applied to domestic systemically important institutions.
Issued: October 2021