Countercyclical Capital Buffer

Current CCyB rate on Irish exposures: 0%

Read the CCyB Rate Announcement November 2020.

The Countercyclical Capital Buffer (CCyB) is a time varying capital requirement which applies to banks and investment firms. It aims to promote a sustainable provision of credit to the economy by making the banking system more resilient and less pro-cyclical.

By increasing regulatory capital requirements in line with the cyclical systemic risk environment, the CCyB looks to ensure additional capital is in place to absorb losses when risks materialise. In addition, the release of the CCyB during a downturn looks to limit the potential that regulatory capital requirements act as an impediment to the supply of credit to the economy.

The Central Bank is the designated authority for setting the CCyB rate in Ireland and as such sets the rate for Irish exposures on a quarterly basis. Within the Single Supervisory Mechanism the ECB assesses the CCyB decisions of national authorities and if necessary has the power to set a higher rate. As such, the CCyB rate set by the Central Bank is done so having consulted with the ECB.

The Central Bank’s high level framework for the countercyclical capital buffer envisages:

  • The CCyB rate being positive sufficiently early in the cycle to effectively promote resilience. Thus, when there is a sustained trajectory in indicators, consistent with emerging cyclical systemic risk over a period of time the Central Bank of Ireland expects to maintain a positive CCyB rate.
  • When that trajectory is persistent or reflects emerging imbalances, across credit and other factors such as the domestic economy, asset prices (especially real estate), risk appetite and global conditions the buffer rate is expected to be above 1%. The level of the buffer will be informed by the level of resilience expected to be sufficient to support the sustainable provision of credit to the real economy in a subsequent downturn.
  • The CCyB rate would be reduced, where a materialisation of cyclical systemic risk or downturn is identified, to a level consistent with mitigating pro-cyclicality.

Relevant Documents

See also

Current CCyB Rates set in Europe

Material Third Countries for the Irish Banking System

2020 Review: List of Material Third Countries*

  • United States of America and Switzerland

*The largest cross-border exposure of the Irish banking system is to the UK. The UK, which has now left the EU, is currently in a transition period. The UK will be added to the above list, immediately following the conclusion of the transition period if the outcome sees the UK being treated as a third country. The transition period will end on 31 December 2020.

See also: