The countercyclical capital buffer is intended to protect the banking sector against losses that could be caused by cyclical systemic risks. Countercyclical capital buffer requirement requires banks to add capital at times when credit is growing rapidly so that the buffer can be reduced when the financial cycle turns. Banks can use the additional capital buffers they have built up during the growth phase of the financial cycle to cover losses that may arise during periods of stress and to continue supplying credit to the real economy.

Eesti Pank has been given the responsibility for setting the levels for the countercyclical capital buffer in Estonia. Eesti Pank bases its assessments of the capital buffers and their levels on the principles agreed by the European Union in the Capital Requirements Directive and also considers the specific nature of the Estonian economy and credit cycle.

Eesti Pank assesses the need for the countercyclical buffer and decides on the rate for it once a quarter.

Quarter 4, 2017

Eesti Pank decided on 11 December 2017 to keep the countercyclical capital buffer rate for credit institutions at 0% of the credit risk exposures located in Estonia.

  • The applicable countercyclical capital buffer rate: 0%
  • The standardised credit-to-GDP ratio: 123%; its deviation from the long-term trend: –14 percentage points
  • The buffer guide: 0%
  • Reasoning for the buffer rate:  there has been no increase in indebtedness in the real economy as shown by the debt-to-GDP ratio in the past three years. Debt liabilities will grow faster in the coming years as the economy grows, but the rate of growth is forecast not to exceed that of nominal GDP consistently or significantly. Furthermore, the banks have not loosened their lending standards and conditions and have not increased their leverage. At the same time, rapid wage growth and improved confidence have supported increased borrowing by households, which could lead to faster growth in indebtedness than forecast and an increase in the attendant risks. The corporate indebtedness could also start to grow again if investment increases. Although current developments in the loan market do not suggest that an immediate rise in the countercyclical buffer rate is warranted, Eesti Pank monitors the indicators that could show a possible build-up of risks and can, if necessary, raise the countercyclical buffer rate above 0%.

Indicators and assessment for the countercyclical capital buffer rate



Quarter 4, 2017.pdf
Quarter 3, 2017.pdf
Quarter 2, 2017.pdf
Quarter 1, 2017.pdf
Quarter 4, 2016.pdf
Quarter 3, 2016.pdf
Quarter 2, 2016.pdf
Quarter 1, 2016.pdf
Quarter 4, 2015.pdf


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Countercyclical capital buffer rates in other European Union countries are published on the website of the European Systemic Risk Board (ESRB). 

Eesti Pank Governor’s Decrees: