Insider Economy CBC sets countercyclical capital buffer at 0%

CBC sets countercyclical capital buffer at 0%

On 18 June 2019, the Central Bank of Cypus (CBC), in accordance with the methodology described in its macroprudential policy, set the countercyclical capital buffer CCyB rate for the period 1 July 2019 – 30 September 2019 at 0% of the total risk exposure amount of:

(a) each licenced credit institution and
(b) each investment firm that:
i. provides the investment services of dealing on own account or underwriting of financial instruments and / or placing of financial instruments on a firm commitment basis; and
ii. has not been exempted by the CBC due to its small or medium size.

Based on the time series ending on 31 December 2018:

  • The gap between the credit-to-GDP ratio and its long term trend (credit-to-GDP gap) based on the broad credit definition is -64,1%
  • The gap between the credit-to-GDP ratio and its long term trend (credit-to-GDP gap) based on the narrow (bank) credit definition is -87,7%.

Given that the credit-to-GDP gap is lower than 2% and taking into account the additional indicators that were assessed by the CBC, the benchmark buffer guide is 0% and the CCyB rate has been set at 0%.

In addition to the credit-to-GDP gap, the CBC takes into account a range of quantitative and qualitative information in its assessment of system-wide risks associated with periods of excessive growth.  The additional indicators assessed by the CBC are: non-financial private sector indebtedness; banking sector resilience; the real estate market; the real economy; and external imbalances.

(Cyprus News Agency)

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