Countercyclical buffer

The countercyclical buffer is a Common Equity Tier 1 Capital adequacy ratio buffer of a bank, Development Bank JSC fixed to limit (reduce) risks accepted in the period of the loan overgrowth and maintaining the level of lending and risks cover after the end of that period.

The value of the countercyclical capital buffer may change within the range of 0-2.5 percentage points, and is defined on the basis of the credit gap taking into account the dynamics of other financial and macroeconomic indicators characterizing the phase of financial cycle in the Republic of Belarus, macroeconomic risks, situation in the financial market and results of the activities of the banking sector.

The credit gap is the deviation from the ratio between the banks’ claims on the economy and nominal GDP from the long-term tendency in the dynamics of the given ratio changed in the percentage points. Positive value of the credit gap gives evidence of the banks’ excessive lending to economy. The more is the positive value of the credit gap, the higher is the level of risks within the scale of the overall banking sector.

Legal fundamentals of countercyclical buffer are established by the Instruction on the regulations of the secure functioning for banks, JSC “Development Bank of the Republic of Belarus” and non-bank credit and finance institutions. The current value of countercyclical buffer is established by Resolution of the Board of the National Bank No.133 dated March 20, 2018.

Valid since Value of the countercyclical buffer,
percentage points
20.03.2018 0

The decision of the National Bank on the increase of the countercyclical buffer value becomes effective no earlier than 6 months from the day of its official publication. The length of period of coming into force depends on the value of disbalances in the financial sphere and speed of risks intensification on the overall banking sector scale. The more significant are the imbalances and the higher is the speed of the risks intensification, the shorter is the given period.