National Bank of Belgium confirms previous decisions on the countercyclical capital buffer for credit institutions

The National Bank of Belgium, in adherence to Article 5 §2 Annex IV to the Banking Law, has resolved to maintain the countercyclical buffer rate for exposures in Belgium at 1.0%. This macroprudential tool aims to alleviate cyclical systemic risks and counter pro-cyclicality in lending, bolstering banks‘ resilience. The buffer rate, expressed as a percentage of risk-weighted assets, typically ranges from 0 to 2.5% but may be higher based on underlying risk considerations.
The countercyclical buffer is determined quarterly, guided by indicators reflecting the credit cycle and risks associated with excessive credit growth. These include the credit-to-GDP gap, changes in credit volumes on Belgian territory, Belgian GDP evolution, ESRB recommendations, and other variables deemed relevant by the National Bank of Belgium. Aligned with Basel III and ESRB guidelines, the buffer rate decision is influenced by a ‚buffer guide‘ derived from the credit-to-GDP gap, specifically based on resident bank loans. Additionally, broader credit measures and macrofinancial indicators are considered.
As a reminder, on 31 August 2023, the National Bank announced a phased increase in the countercyclical buffer rate, reaching 1.0% on 1 October 2024, citing an uncertain economic environment following a sudden hike in interest rates. In response to global uncertainties in 2022 and the first half of 2023, the National Bank maintained the countercyclical buffer rate at 0%, allowing Belgian banks flexibility to utilize their capital for credit provisions amid potential challenges. Mid-2023, the National Bank signaled a potential reactivation of the countercyclical buffer due to reduced uncertainty and orderly credit and real estate cycles. On 7 July 2023, a formal decision was made, citing the gradual impact of tighter financial conditions on the real economy and the need to heighten banking sector resilience.
Quarterly reassessment of countercyclical capital buffer decisions, in accordance with European regulations and the 2014 Banking Act, is integral. On 5 December 2023, the National Bank confirmed the continuation of its current policy, affirming the decisions made in the preceding quarter. The latest decision maintains the activation of the countercyclical capital buffer on 1 October, creating a buffer of around €1.1 billion on 1 April 2024 (CCyB rate of 0.5%) and approximately €2.3 billion on 1 October 2024 (CCyB rate of 1%).
Simultaneously, the sectoral systemic risk buffer for Belgian mortgage loans will decrease from 9% to 6% on 1 April 2024, resulting in a total buffer reduction from €2 billion to approximately €1.3 billion. Consequently, the combined macroprudential capital buffers will increase from €2 billion to €2.5 billion on 1 April 2024 and further to €3.6 billion on 1 October 2024.