Банкеръ Daily

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The BNB increased its countercyclical capital buffer due to negative interest rates


The BNB Governing Council has defined the level of the countercyclical capital buffer, applicable to credit risk exposures in Bulgaria  to be 1.5% for the first quarter of 2021.


Both the  reference indicator and the relevant guidelines of the European Systemic Risk Board and other indicators, which the BNB has considered appropriate for reflecting  the cyclical systemic risk, should be taken into account while outlining the level of the countercyclical buffer.

Almost at the end of the third quarter of 2019, the credit / GDP ratio, calculated pursuant to the methodology published on the Bulgarian National Bank website, amounts to 94.0%. The deviation of the indicator from the  long-term trend is negative (-40.1 percentage points), which corresponds to the zero value of the anticyclical buffer benchmark.


Long-term retention of low interest rates could lead to a considerable increase in debt, which would make the banking sector's  asset quality, profitability and capital position more sensitive to possible  adverse changes in the economic sphere. The rise of the level of the countercyclical buffer aims to enhance the stability of the banking sector in case of such developments.


The level of the countercyclical buffer viable to credit risk exposures in RB stays at 0.5% till the end of the first quarter of 2020 and at  1% for the period April - December 2020. The BNB Governing Council will determine the applicable level in the second quarter of 2021 in March 2020.

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