Countercyclical Capital Buffer 

The countercyclical capital buffer (CCyB) is a time varying capital requirement which applies to banks and investment firms. It aims to promote a sustainable provision of credit to the economy by making the banking system more resilient and less pro-cyclical. By increasing regulatory capital requirements in line with the cyclical systemic risk environment, the CCyB looks to ensure additional capital is in place to absorb losses when risks materialise. In addition, the release of the CCyB during a downturn looks to limit the potential that regulatory capital requirements act as an impediment to the supply of credit to the economy.

The Central Bank is the designated authority for setting the CCyB rate in Ireland and as such sets the rate for Irish exposures on a quarterly basis. Within the Single Supervisory Mechanism the ECB assesses the CCyB decisions of national authorities and if necessary has the power to set a higher rate. As such, the CCyB rate set by the Central Bank is done so having consulted with the ECB.

The CCyB rate on Irish exposures is currently set at 1%; this rate is considered appropriate in terms of building banking sector resilience given the current level of cyclical risk taking into account recent domestic and global developments.

 Relevant Documents

The Countercyclical Capital Buffer in Ireland: FAQ

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