The NBB keeps the CCyB rate at 0%

Pursuant to its macroprudential powers laid down in the Belgian Banking Law of 2014, the NBB decided on 9 June 2020 to maintain the countercyclical buffer rate for credit risk exposures to the Belgian private non-financial sector at 0 % for the third quarter of 2020.

Given the significant challenges the global economy is now facing, the National Bank of Belgium (NBB) had announced, on 11 March 2020, the full release of the countercyclical buffer.

The countercyclical buffer is a temporary macroprudential buffer that is built up during the upward phase of the credit cycle in order to ensure sufficient absorption capacity for banks to have a sufficient margin to cover credit losses during the downward phase of the credit cycle.

In a scenario of significant expected loan losses, like the one we currently experience, macroprudential action, such as the CCyB release, can help to mitigate the potential procyclicality of the banking sector by granting credit institutions sufficient room to absorb ensuing credit losses, to continue ensuring its financial intermediation services to the real economy and preserving financial stability.

Based on current projections and risk assessments, the NBB expects not to increase the CCyB for a period of at least one year. A reactivation of the CCyB in the short run seems hence very unlikely. During this period, the NBB will also interpret cautiously signals from standard indicators of the credit cycle and override the potentially procyclical and erroneous signals that could follow from specific indicators, such as the credit gap – measuring the deviation of the credit-to-GDP ratio from its long-term trend -, as a consequence of a significant decrease in GDP.

The NBB will review the situation on a quarterly basis.