National Bank maintains countercyclical capital buffer for financial institutions at 0%

On 1 March 2022, the National Bank of Belgium (NBB) decided to maintain the countercyclical buffer rate (CCyB) at 0% for the second quarter of 2022. Belgian financial institutions are therefore not required to build additional buffers for the risks related to their supply of credit to the real economy in Belgium.

The NBB takes a decision on this issue every quarter, in accordance with its powers under the 2014 Banking Law. The countercyclical buffer is a temporary buffer that is built up during the upward phase of the credit cycle to ensure that banks have sufficient margin to cover credit losses during the downward phase of the credit cycle.

In March 2020, at the beginning of the pandemic, the NBB released this macroprudential capital buffer worth around € 1 billion in order to provide additional room for Belgian banks to (1) recognise, in a timely and conservative way, potential credit losses, (2) increase lending to the private sector and (3) finance moratoria and other debt restructuring solutions for viable borrowers experiencing temporary or more structural repayment problems with bank loans.

Over the first few weeks of 2022, the need for such support to help banks fulfill their critical role in an economic crisis seemed to have reduced significantly. At the same time, credit growth indicators showed renewed dynamism that was comparable to the situation in 2019 when the activation of the CCyB was first announced in Belgium. This would have called for a reactivation of the CCyB in the near future. Yet, given the current uncertainty regarding macro-financial developments, the NBB is currently adopting a wait-and-see approach.

The NBB will continue to monitor these developments closely in the coming weeks, including the economic and financial fall-out from the war in Ukraine, and will assess whether reactivating the countercyclical buffer in the third quarter is a realistic policy orientation.