National Bank of Belgium keeps the countercyclical buffer rate at 0,5 %

Pursuant to its macroprudential powers laid down in the Belgian Banking Law of 2014, the National Bank of Belgium decided on 16 December 2019 to maintain the countercyclical buffer rate for credit risk exposures to the Belgian private non-financial sector at 0.5 % for the first quarter of 2020. This countercyclical buffer rate becomes binding from 1 July 2020. The countercyclical buffer is a temporary buffer that is built up during the upward phase of the credit cycle in order to ensure sufficient absorption capacity for banks to have sufficient margin to cover credit losses during the downward phase of the credit cycle.

A number of reference indicators indicate that the Belgian credit cycle remains dynamic. The credit-to-GDP gap – which, according to the Belgian law, is a key reference indicator for the credit cycle – stands at 1.5%. The decrease of the credit gap relative to the previous quarter is mainly due to statistical revisions in 2019 Q3 for GDP measurements (in the context of a benchmark review of the annual accounts). However, on the basis of NBB baseline projections, the credit gap is expected to increase back to a level around 2% in the coming year. Pursuant to the Guidelines of the European Systemic Risk Board, this level justifies a positive countercyclical buffer rate. As recent developments remain in line with the base scenario underlying the activation of the countercyclical buffer (in June 2019), no change is required in the countercyclical buffer rate. The relevant key indicators, including the credit-to-GDP gap, are further detailed in the document “Quarterly decision of the National Bank of Belgium on the countercyclical buffer rate (2020 Q1)”.

The Bank stands ready to relax these additional buffer requirements should cyclical risks decrease and the credit cycle turn. The buffers will in any case be immediately released in the event of a severe and persistent financial shock.

This measure is subject to mandatory reciprocity and hence applies to all EU banks operating in Belgium, at both the individual and the consolidated level.