Countercyclical Capital Buffer

CCyB rate on Irish exposures

The Countercyclical Capital Buffer (CCyB) 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 when times are good, 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 reviews the CCyB 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, having consulted with the ECB.

The Central Bank’s primary objective for the CCyB is to promote resilience in the banking sector – proportionate to the risk environment - with a view to facilitating a sustainable flow of credit to the economy through the macro-financial cycle. In meeting this objective:

• The Central Bank will look to build-up the CCyB rate to 1.5 per cent when risk conditions are deemed to be neither elevated nor subdued. This strategy acknowledges the inherent uncertainty in assessing the degree of risk facing the banking system and the time lags in implementing the CCyB.
• Should cyclical risk conditions, as reflected by indicators across credit, the domestic economy, asset prices (including real estate), risk appetite and global conditions reflect emerging imbalances or an elevated risk environment, the CCyB rate is expected to be above 1.5 per cent.
• The CCyB rate would be partially or fully reduced in cases where a materialisation of cyclical systemic risk or a downturn is identified, to facilitate the banking system to absorb losses and maintain the supply of lending to the economy.

Relevant Documents

• CCyB Public data March 2024
• A framework for macroprudential capital
• A framework for macroprudential capital - CCyB addendum
• Economic Letter vol. 2018, no.7: Using the Countercyclical Capital Buffer: Insights from a structural model
• Financial Stability Note 2018, no.4: Measuring and mitigating cyclical systemic risk in Ireland: The application of the countercyclical capital buffer
• Financial Stability Note 2020, no.1: Releasing the CCyB to support the economy in a time of stress

See also

• Speech: When is the right time? Macroprudential policy and the cycle (Deputy Governor Sharon Donnery)
• Explainer: How does the Central Bank help to protect the banking system from economic up and downs?

Current CCyB Rates set in Europe

• See current CCyB rates for Europe on the European Systemic Risk Board (ESRB) website.

Material Third Countries for the Irish Banking System

2023 Review: List of Material Third Countries

• United Kingdom, United States of America and Switzerland