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 September 2019 to maintain the countercyclical buffer rate for credit risk exposures to the Belgian private non-financial sector at 0.5 % for the fourth quarter of 2019. 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 a further acceleration of the Belgian credit cycle. The credit-to-GDP gap – which, according to the Belgian law, is a key reference indicator for the credit cycle – reached 2.8 % in 2019Q2. Pursuant to the Guidelines of the European Systemic Risk Board, this level justifies a positive countercyclical buffer rate. Going forward, baseline projections for credit growth and GDP suggest a further increase in the credit-to-GDP gap. 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 (2019 Q4)”.
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.