Belgian National Bank stands ready to introduce a counter-cyclical credit buffer
Monday, 03 June 2019
The National Bank of Belgium (BNB) is ready to activate a counter-cyclical capital buffer (CCyB) should the acceleration of the credit cycle be confirmed in Belgium, BNB Governor Pierre Wunsch confirmed to Belga news agency on Monday.
“We are in discussion with the Government on this issue,” Wunsch said at the presentation of the bank’s 2019 macroprudential report.
In concrete terms, the activation of a CCyB means financial institutions should maintain a higher minimum level of equity to offset any possible financial swing.
This buffer, equivalent to 0.5% of assets weighted by the risks of lending institutions, would allow them to absorb any losses in the event of a financial recession and, thereby, to continue to provide credit to the real economy.
“We think it would be intelligent to take that measure,” said Wunsch, insisting, however, that it is a preventive mechanism and, moreover, should not cause any problems for Belgian banks, since most of them currently have a capital surplus.
France, Ireland and Luxembourg have already established a CCyB and Belgium’s Federal Government could decide to do so on the advice of the BNB.
Wunsch said the measure would only be temporary, and he recalled that Belgium’s financial sector was “one of Europe’s healthiest”.