The CNB Bank Board decided today to lower the countercyclical capital buffer rate for exposures located in the Czech Republic to 1.75%, mainly because of a continued reduction in the cyclical systemic risks in the banking sector's balance sheet. Banks will be required to apply the rate from 1 April 2024.

The decision took into account the position of the Czech economy close to the bottom of the financial cycle, the size of the credit risks accumulated in the banking sector's balance sheet and the evolution of the banking sector's vulnerability. When assessing the cyclical systemic risks, the Bank Board also considered the banking sector's resilience in an environment of increasing structural systemic risks. The Bank Board will discuss those risks again at its meeting on financial stability in June, when it will also consider setting a systemic risk buffer rate.

The countercyclical capital buffer is an important macroprudential policy instrument. Banks and credit unions create this buffer on the basis of the CNB's instructions in periods of excessive growth in lending. By contrast, at times of falling economic activity, accompanied by rising loan losses, it is customary to release the buffer so that non-financial corporations and households have access to loans without excessively tight conditions.

More details on the Bank Board's decision are available in the Provision of a general nature on setting the countercyclical capital buffer rate for the Czech Republic I/2024, which will be published on 8 March 2024.^[1]

The CNB has been making decisions on the countercyclical capital buffer rate every quarter since 2014. The next decision will be made at the Bank Board meeting in June 2024.

Štěpánka Filipová
CNB spokesperson

^[1] NOTES FOR JOURNALISTS

• The Czech National Bank decides on a quarterly basis whether to set a countercyclical capital buffer rate in the Czech Republic, whether to amend the rate or whether to leave it unchanged. It sets or amends the rate in a Provision of a general nature on setting the countercyclical capital buffer rate. Where it decides to leave the rate unchanged, it publishes a justification for doing so in a document titled Official Information of the Czech National Bank regarding the assessment of the setting of the countercyclical capital buffer rate. The countercyclical capital buffer is intended to protect the banking sector against risks arising over the financial cycle. These include in particular risks arising from excessive growth in lending, which contributes to the build-up of systemic risks and increases the potential for sharp fluctuations in economic activity.
• More information about the countercyclical capital buffer on the CNB website
• Information about the setting of the countercyclical capital buffer in other European countries on the website of the European Systemic Risk Board (external link)