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 3, 2019

Eesti Pank decided on 30 September 2019 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: 113%;its deviation from the long-term trend: -14 percentage points
  • The buffer guide: 0%
  • Reasoning for the buffer rate: the rate of growth in debt in the non-financial sector remains below nominal economic growth for the current year and the long-term average nominal growth. Borrowing by companies has remained moderate given the growth in the economy, though household debt continues to grow quickly. However, activity in the real estate market has declined a little, and so the rate of growth in new housing loans has slowed. The banks have not eased their lending standards and loan margins have risen slightly. This development does not indicate imbalance in the credit market, though the relatively good state of the economy means the risk remains of excessive borrowing that could increase the risks from the credit cycle. For this reason Eesti Pank monitors the growth in debt and indicators that affect it, and can if necessary raise the countercyclical capital buffer rate above 0%.

Indicators and assessment for the countercyclical capital buffer rate

Assessments

Indicators

Quarter 3, 2019.pdf
Quarter 2, 2019.pdf
Quarter 1, 2019.pdf
Quarter 4, 2018.pdf
Quarter 3, 2018.pdf
Quarter 2, 2018.pdf
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

xlsx

html pdf

 

Decrees of the Governor of Eesti Pank

Countercyclical capital buffer rates in other countries: