Budapest, 23 March 2016 – The MNB has reviewed the countercyclical capital buffer rate introduced from 1 January 2016. Since still no excessive credit growth is observed in the domestic banking system, the central bank decided to leave the countercyclical capital buffer rate at 0 per cent, which supports the increase in lending.
Following the outbreak of the financial crisis, the need to mitigate the systemic risks arising from the excessive swings of the financial cycle arose, one of the most important tool of which has become the so-called countercyclical capital buffer. This new instrument, on the one hand, directly increases the banking system's shock-absorbing capacity, and on the other hand it also mitigates the financial cycle swings. The supplementary capital requirement accumulated in the ascending phase of the credit cycle may curb excessive credit outflow, while in crisis periods the release of the formerly accumulated capital buffers will help lending, and thereby the recovery of the economy. Thus, the purpose of the countercyclical capital buffer is to increase the stability and resilience of the financial intermediary system across lending cycles, and ultimately to ensure the financial system's sustainable contribution to economic growth.
Based on the EU and the national regulations, the capital buffer rate is defined by the Magyar Nemzeti Bank (MNB) in its capacity as macroprudential authority. The central bank sets the countercyclical capital buffer rate quarterly in a decree, which is determined after giving due consideration to several cyclical and vulnerability indicators.
At present no excessive credit growth may be observed in the domestic banking system, thus the MNB’s Financial Stability Board decided on maintaining the countercyclical capital buffer rate applicable to domestic exposures at 0 per cent. On the whole, based on the indicators used for determining the countercyclical capital buffer rate, the degree of the cyclical systemic risks may be deemed low. No change may be expected in the rate on the time horizon of the next 12 months, thereby supporting the increase in the banks' lending activity.
In addition to determining the actual value of the countercyclical capital buffer rate, recently the MNB has also supplemented the methodology determining the countercyclical capital buffer with the conditions for releasing the capital requirement.