Countercyclical capital buffer rate set at 0.25%, applicable from 1 October 2025
18/10/2024 - Press Releases
- The Bank of Greece has adopted a framework for a positive neutral rate of the countercyclical capital buffer, which is activated at an early stage in the economic and financial cycle, when cyclical systemic risks are neither subdued nor elevated.
- Cyclical systemic risks in Greece for the fourth quarter of 2024 are assessed as “low” and the risk environment as “standard”.
- The Bank of Greece has decided to set the countercyclical capital buffer rate for Greece at 0.25%, applicable from 1 October 2025.
Under Executive Committee Act 235/1/07.10.2024, the Bank of Greece adopted a framework for a positive neutral rate of the countercyclical capital buffer, which is activated at an early stage in the economic and financial cycle, when cyclical systemic risks are neither elevated nor subdued.
The build-up of this buffer ensures that there is sufficient capital headroom in a standard risk environment, i.e. prior to the emergence of cyclical systemic risks. It thus enables institutions to absorb losses and maintain a smooth flow of credit to the real economy, in the event of unexpected shocks which are not related to the phase of the economic and financial cycle (e.g. a global health crisis like the COVID-19 pandemic).
Under the above Act, the Bank of Greece set the target rate for the positive neutral rate of the countercyclical capital buffer in Greece at 0.5%.
The quarterly assessment of the intensity of cyclical systemic risks and the appropriateness of the countercyclical capital buffer rate for Greece takes into account the standardised credit-to-GDP gap, the buffer guide and, in particular, additional indicators for monitoring the build-up of cyclical systemic risks.
The buffer guide, as set out in Recommendation ESRB/2014/1 of the European Systemic Risk Board (ESRB), is “zero”, as the standardised credit-to-GDP gap has remained negative since the third quarter of 2012 and, according to the latest available data, stood at -31.8 percentage points in the first quarter of 2024.
The Bank of Greece also examines a number of additional indicators in order to monitor the build-up of cyclical systemic risks relating to credit developments, private sector indebtedness, residential and commercial real estate prices, external imbalances, the banking sector, and capital markets (see Table “Cyclical systemic risk indicators”). The analysis of additional indicators points to emerging cyclical systemic risks in certain areas, such as credit growth to non-financial corporations, residential real estate prices and the current account, but confirms that there is no excessive credit growth in Greece. Overall, cyclical systemic risks in Greece for the fourth quarter of 2024 are assessed as “low” and the risk environment as “standard”.
At the current juncture, implementing an appropriate macroprudential policy is of utmost importance for strengthening banking sector resilience. The stable macroeconomic environment, the improvement in the banking sector’s economic fundamentals and prudential indicators, along with the upgrade of the sovereign credit rating to investment grade, all favour the creation of macroprudential space that will ensure the stability of the financial system in the medium term.
To this end, under Executive Committee Act 235/2/07.10.2024, the Bank of Greece has decided to set the countercyclical capital buffer rate for Greece at 0.25%, applicable from 1 October 2025.
More information:
The countercyclical capital buffer (CCyB) is a macroprudential policy tool aimed at preventing the build-up of cyclical systemic risks, ensuring an appropriate level of credit growth and leverage, both in the upward and downward phases of the economic and financial cycle, as well as strengthening banking sector resilience.
More information on the countercyclical capital buffer can be found here.
Related links:
Bank of Greece Executive Committee Act 235/1/07.10.2024
Bank of Greece Executive Committee Act 235/2/07.10.2024