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CBC sets countercyclical capital buffer at 0%

June 19, 2019 at 11:30am

On 18 June 2019, the Central Bank of Cypus (CBC), in accordance with the methodology described in its macroprudential policy, set the countercyclical capital buffer CCyB rate for the period 1 July 2019 – 30 September 2019 at 0% of the total risk exposure amount of:

(a) each licenced credit institution and
(b) each investment firm that:
i. provides the investment services of dealing on own account or underwriting of financial instruments and / or placing of financial instruments on a firm commitment basis; and
ii. has not been exempted by the CBC due to its small or medium size.

Based on the time series ending on 31 December 2018:

  • The gap between the credit-to-GDP ratio and its long term trend (credit-to-GDP gap) based on the broad credit definition is -64,1%
  • The gap between the credit-to-GDP ratio and its long term trend (credit-to-GDP gap) based on the narrow (bank) credit definition is -87,7%.

Given that the credit-to-GDP gap is lower than 2% and taking into account the additional indicators that were assessed by the CBC, the benchmark buffer guide is 0% and the CCyB rate has been set at 0%.

In addition to the credit-to-GDP gap, the CBC takes into account a range of quantitative and qualitative information in its assessment of system-wide risks associated with periods of excessive growth.  The additional indicators assessed by the CBC are: non-financial private sector indebtedness; banking sector resilience; the real estate market; the real economy; and external imbalances.

(Cyprus News Agency)