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BCBS update Countercyclical Capital Buffer Rates Information

BCBS updates CCyB Information

9th September 2019

At the end of last month, the Basel Committee on Banking Supervision (BCBS) updated its information regarding its Countercyclical Capital Buffer (CCyB).

The updated content on the BCBS website comprised confirmations of CCyB policy rates as follows:

• confirmation of 1% CCyB policy rate by the United Kingdom;
• confirmations of 0% CCyB policy rates by Belgium, the Netherlands, Russia, Spain, United States;
• confirmation of 2.5% CCyB policy rate by Hong Kong;

In addition higher CCyB policy rates were informed as follows, to be implemented now and in the future:

• a higher CCyB policy rate of 0.25% is now implemented in France, as announced on 29 June 2018.
• there will be increases of future CCyB policy rates by:

o France (from 0.25% to 0.50% as of April 2020),

o Germany (from 0% to 0.25% as of July 2020); and

o Luxembourg (from 0% to 0.25% applicable as of April 2020).

Countercyclical capital buffer rates

The Countercyclical Capital Buffer is an amount of capital a firm will have to set aside in relation to a firm's exposure in other jurisdictions, the aim of which is to avoid a breach of minimum capital requirements. It is often shortened in reference to CCyB.

In the UK, the CCyB is set by the Financial Policy Committee (FPC) of the Bank of England. The countercyclical capital buffer (CCyB) is a tool that enables the FPC to adjust the resilience of the banking system. The FPC increases the CCyB when it judges that risks are building up and it can be lowered in times of economic stress, such as was decided in July 2016 following the economic uncertainty after the vote on Brexit.

The current CCyB of the UK is 1%. This means that banks are required to have an additional cushion of capital with which to absorb potential losses, enhancing their resilience and contributing to a stable financial system.

Previously the CCyB had been lowered to 0% in July 2016, then was increased to 0.5% in June 2018 and again increased to its current level of 1% from November 2018.

The requirement for Countercyclical Capital Buffer and a number of the associated consequences will not only apply to Banks, but also to some Investment Firms subject to IFPRU.

Capital Requirements Support for Firms:

If your firms should require any support or assistance in calculating your minimum capital requirement or any aspect of your COREP reporting requirements, our dedicated support team would be happy to hear from you.

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