Countercyclical Capital Buffer

    The countercyclical capital buffer was introduced within the Basel III framework and represents one of the main macroprudential policy instruments. Its goal is to limit excessive credit growth that leads to the build-up of systemic risks. The countercyclicality of the buffer serves the main purpose of macroprudential policy, which is to reduce systemic risks. In the event of negative shocks, the countercyclical buffer should help the financial system to avoid a significant deterioration of lending to the economy and thus help prevent a further worsening of conditions in the financial sector and the economy as a whole.

    The countercyclical buffer should be met by using only Common Tier 1 capital and is determined in the range of 0%-2.5% of total risk-weighted assets. It is determined on a quarterly basis and, whenever necessary, the countercyclical buffer is changed by 0.25 percentage points or by a multiple of that amount. In the event of a rate increase, capital requirements should be met within one year; however, in the event of a rate reduction, the requirements should be met immediately.

    In determining the countercyclical capital buffer, an analysis of a number of factors is taken into account, including the credit-to-GDP ratio and indicators describing its deviation from the long-run trend; trends in lending; other indicators of the financial sector’s cyclical position; and characteristics of the country's domestic and external macro-financial environment and etc. 


    Countercyclical Capital Buffer
    Percentage Points
    New Rate (%)