Systemic risk buffer

In case of the build-up of non-cyclical systemic risks, a Systemic Risk Buffer may be prescribed for the financial system as a whole or for its specific subsets.

The macroprudential authority ascertains the necessity of the buffer’s introduction and defines its rate for each institution, in proportion to their respective contribution to systemic risks. The Systemic Risk Buffer is an efficient tool in the targeted management of structural macroprudential risks. The introduction of the instrument can manage high concentrations of risk associated with specific sectors or exposures, as the instrument offers national authorities a relatively high degree of calibration freedom. Similar to the rest of the capital buffers, the introduction of the buffer increases the loss-absorption capacity of institutions through capital add-on or through the reduction of risk-weighted exposure values. The extent to which the instrument is targeted depends on its calibration; with that in mind, it is also important to address the issue of potential regulatory arbitrage.

The MNB has temporarily suspended the use of the systemic risk capital buffer to mitigate the effects of the coronavirus pandemic