CBC sets countersyclical capital buffer rate to 0%

The Central Bank of Cyprus pursuant to its macroprudential policy has set the countercyclical capital buffer (CCyB) rate for the period 1 April 2018 – 30 June 2018 at 0% of the total risk exposure amount of every licenced credit institution and every investment firm operating in Cyprus.

The CBC said that according to the time series ending on 30 September 2017, the gap between the credit-to-GDP ratio and its long term trend (credit-to-GDP gap) based on the broad credit definition is -46,5%, whereas 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 -49,3%.

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%, the CBC said.

In addition to the credit-to-GDP gap, in setting the CCyB rate, the CBC takes into account other indicators such as non-financial private sector indebtedness; banking sector resilience, the real estate market, the real economy and external imbalances.

The CBC notes that 53 small and medium-sized investment firms are exempted from the requirement to maintain the CCyB rate.

Source: Cyprus News Agency