DNB maintains Countercyclical Capital Buffer at 2% – May 2024

Read aloud

On 31 May 2023, DNB announced an increase of the countercyclical capital buffer (CCyB) to 2%. Banks with loans outstanding in the Netherlands must comply with this requirement by 31 May 2024. Since the previous CCyB announcement, the risk environment has not changed materially. We therefore see no reason to amend our earlier CCyB decision.

Published: 28 May 2024

The purpose of the CCyB is to increase banks' resilience as cyclical risks build up, and to release the buffer as soon as risks materialise. This gives banks additional headroom to absorb losses in bad times and supports lending to businesses and consumers, thus limiting the immediate impact of a crisis on the real economy. The CCyB applies to domestic exposures and has a mandatory reciprocity of up to 2.5%. Therefore, as of 31 May 2024, foreign banks with exposures in the Netherlands must also hold capital due to the 2% CCyB that applies here.

In accordance with our framework for setting the CCyB, we aim for a 2% CCyB in a standard risk environment, i.e. a situation where cyclical systemic risk is neither particularly high nor particularly low. In doing so, we seek to take account of the inherent uncertainty involved in measuring (cyclical) systemic risks. We then determine the level of the CCyB on the basis of a varied set of indicators (including the credit gap shown in Chart 1, but primarily on the indicators in Table 1) that interpret the phase of the cyclical systemic risk and compare it with a structural trend.

Our Spring 2023 Financial Stability Report contains a detailed description of why we felt it was suitable to raise the CCyB to 2%. Furthermore, we indicated at the time that we would reconsider the increase to 2% if financial stability risks materialised during the build-up period. At this point, we see no reason to deviate from this earlier communication, meaning the increase of the CCyB remains unchanged. Therefore on 31 May 2024, banks with loans outstanding in the Netherlands must comply with the CCyB requirement of 2%.

Chart - Buffer guide