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

The National Bank of Belgium (NBB) maintains the countercyclical capital buffer (CCyB) rate at 0% and counts on Belgian banks to use their ample available capital resources to support the Belgian economy in these challenging times.

To ensure that Belgian banks continue to have full flexibility to use their ample available capital resources to support the real economy, the NBB decided on 6 December 2022 to maintain the countercyclical capital buffer (CCyB) rate at 0% for the first quarter of 2023.

The NBB counts on Belgian banks to use their available capital resources to continue to help, where necessary, Belgian households and non-financial corporations cope with the challenges posed by record-high energy prices and challenging macroeconomic conditions. In addition to ensuring an adequate flow of credit to the real economy, the focus should remain on proactively offering moratoria and other debt rescheduling options to borrowers experiencing temporary or more structural repayment problems due to high energy bills and rising living or operating expenses.

Belgian banks have already started to grant payment relief to clients, following their unilateral commitment in September to offer moratoria to eligible mortgage holders and case-by-case solutions to households and non-financial corporations facing financial difficulties in this challenging period. The NBB counts on Belgian banks to continue to provide pro-active assistance to borrowers. As financial conditions have tightened significantly amidst vulnerabilities accumulated during the long period of low interest rates, the probability of a more significant materialisation of losses on loans to the domestic non-financial private sector remains high. It is true that the — mostly backward-looking — asset quality indicators do not (yet) point to an increase in loan repayment problems. But banks should look ahead and base their credit risk provisions on sufficiently conservative assessments of potentially stressful economic scenarios and use their current strong capital position to proactively raise loan loss provisions, where necessary. The capital resources that remain available pursuant to the decision not to re-activate the CCyB should thus also be used to do so.

In the current macrofinancial context still characterised by a high level of uncertainty, the NBB also urges financial institutions to remain cautious in their decisions regarding dividends and other types of profit distributions and to base these decisions on a conservative forward assessment of their capital and provisioning needs in light of potential macroeconomic developments.

The NBB will continue to closely monitor bank credit, moratoria and other forms of debt restructuring. CCyB decisions are revisited each quarter, in accordance with European regulations and the NBB’s macroprudential powers under the 2014 Banking Law.