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 1, 2018

Eesti Pank decided on 26 March 2018 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: 121%; its deviation from the long-term trend: –16 percentage points
  • The buffer guide: 0%
  • Reasoning for the buffer rate:  there has been no increase in the past three years in indebtedness in the real economy, which is the ratio of debt to GDP, and it has even started to decrease in recent quarters because of rapid GDP growth. Debt liabilities will grow faster in the coming years if the economy continues to grow rapidly and investment increases, but the rate of growth is not forecast to exceed that of nominal GDP consistently or significantly. The banks have not loosened their lending standards and conditions and have not increased their leverage. However, households have started to borrow more as wages have risen rapidly and confidence has increased, and this could lead loan burdens to increase faster than forecast and so increase the related risks. Total corporate debt could also start to grow strongly again if investment increases. Although the current development of the loan market does not give grounds for raising the countercyclical buffer rate, Eesti Pank constantly monitors the developments that could indicate 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 1, 2018.pdf
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: