National Bank considers re-activation of the countercyclical capital buffer

The NBB has announced its decision to maintain the CCyB at 0% for the quarter starting on 1 July 2023. However, the NBB will consider re-activating the CCyB for the following quarter, beginning on 1 October 2023.
The decision to maintain the buffer at zero was made in response to high uncertainty caused by potential energy crises, turning credit and real estate cycles, as well as turbulence in the US and Swiss banking sectors.
During the period of uncertainty in 2022 and the first half of 2023, the NBB aimed to provide Belgian banks with flexibility by keeping the CCyB at 0%. This allowed the banks to utilize their available capital to raise credit provisions and support the real economy. The uncertainty has since dissipated to a significant extent, and the Belgian credit and real estate cycles have experienced an orderly downturn. The NBB welcomed the moderate lengthening of mortgage maturities, which helped counteract the negative effects of higher interest rates on the affordability of new mortgage loans.
Considering the current situation, the NBB will evaluate the re-activation of the CCyB for the quarter starting on 1 October 2023. This evaluation will involve an analysis that weighs the costs of procyclicality against the benefits of increased resilience in the Belgian banking system. The gradual impact of tighter financial conditions on the real economy is an ongoing process, leaving banks exposed to unexpected losses. Reactivating the CCyB would enhance their resilience against potentially higher-than-expected losses.
In addition, the NBB will also prepare for the extension of the sectoral systemic risk buffer for Belgian mortgage loans. Although the new level is expected to be lower than the current 9%, the buffer’s expiry date in April 2024 will be taken into account. The successful implementation of Belgian mortgage loan supervisory expectations, introduced in 2020, has allowed for this recalibration. This success is confirmed by the recent „comply or explain“ reports from banks and insurance companies.
It is important to note that CCyB decisions are reviewed quarterly, following European regulations and the NBB’s macroprudential powers under the 2014 Banking Act.
ANNEX:
Quarterly decision of the National Bank of Belgium on the countercyclical buffer rate for 2023Q3: 0 %