Countercyclical capital buffer (CCyB)

Capital buffers are requirements additional to the microprudential capital requirements. They are designed to curb the growth of systemic risk and bolster institutions’ solvency so that they can absorb any losses should systemic risks arise.

As depicted in the figure, higher capital requirements make banks take actions (e.g. lower the volume of lending and raise rates, take on less risk) that moderate the economic cycle (consumption and investment) and financial asset prices. This, in turn, also moderates the credit cycle.

Note: See A. Estrada and J. Mencía (2021), “El cuadro de mandos de la Política Macroprudencial File PDF: Opens in new window (377 KB)", Información Comercial Española, No 918, 2021. (Only available in Spanish).

The countercyclical capital buffer (CCyB) is activated during credit cycle upswings, increasing capital requirements to curb the development of systemic imbalances, raise banks’ solvency levels and thus improve their risk-absorbing capacity.

It is released (fully or partially) during credit cycle downturns to help mitigate the adverse impact of crises on the supply of credit to the real economy.

The instrument can be activated for credit exposures as a whole or for certain sectors where imbalances have been identified.

List of prior CCyB announcements

  • 2023: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Turkey, United Kingdom and the United States.
  • 2022: Brazil, Chile, Colombia, Mexico, Peru, Turkey, United Kingdom and the United States.
  • 2021: Brazil, Chile, Colombia, Mexico, Peru, Turkey, United Kingdom and the United States.
  • 2020: Brazil, Chile, Colombia, Mexico, Peru, Turkey and the United States.
  • 2019: Brazil, Chile, Mexico, Peru, Turkey and the United States.
  • 2018: Brazil, Chile, Mexico, Peru, Turkey and the United States.
  • 2017: Brazil, Chile, Mexico, Peru, Turkey and the United States.
  • 2016: Brazil, Chile, Mexico, Turkey and the United States.

Its activation during economic booms incurs costs in terms of a loss of GDP growth. Yet this adverse effect is far outweighed by the benefits associated with reducing the likelihood and impact (in terms of GDP losses) of future crises.

Note: The solid blue and yellow lines depict the estimated impact in percentage points on the 5th and 50th percentiles of the conditional distribution of GDP growth, respectively. The dotted blue lines depict the 95% confidence bands. The analysis is conducted for a sample of the 28 EU Member States. For further details on the methodology see J. E. Galán (2020), “The benefits are at the tail: uncovering the impact of macroprudential policy on growth-at-riskOpens in new window. Journal of Financial Stability, in press

Decisions on these instruments are made via a guided discretion procedure, that considers not only automatic rules, but also relies on quantitative indicators and relevant qualitative information.

Charts monitoring decisions on the countercyclical capital buffer (CCyB)

Credit-to-GDP gap and output gap

The benchmark quantitative indicator is the credit-to-GDP gap. The Banco de España also measures an adjusted credit-to-GDP gap to take into account the specific duration of the financial cycle in Spain. The output gap is also used. The chart depicts the path of these three variables.

SOURCES: INE, Banco de España and own calculations.

Note: The grey shaded areas show two financial crisis periods identified in Spain since 2009, namely the systemic banking crisis (2009 Q1 to 2013 Q4) and the systemic crisis triggered by COVID-19 (2020 Q1 to 2021 Q4). The output gap represents the percentage difference between actual GDP and its potential value. Values calculated at constant prices for 2010. See P. Cuadrado and E. Moral-Benito (2016), “Potential growth of the Spanish economy (443 KB)”, Occasional Paper No 1603, Banco de España. The credit-to-GDP gap is calculated as the difference in percentage points between the actual ratio and its long-term trend calculated by applying a statistical one-sided Hodrick-Prescott filter with a smoothing parameter equal to 25.000. This parameter is calibrated to adapt it to the financial cycles historically observed in Spain. See J. E. Galán (2019), “Measuring credit-to-GDP gaps. The Hodrick-Prescott filter revisited (1 MB)”, Occasional Paper No 1906, Banco de España.

Data download File CSV: Opens in new window (7 KB)

Complementary indicators

The charts depict other complementary indicators that are also considered in CCyB decision-making (e.g. credit intensity; price gaps in the real estate sector and other measures of house price imbalances; the non-financial private sector’s debt service; and current account imbalances).

SOURCES: INE, Banco de España and own calculations.

Note: The grey shaded areas show two financial crisis periods identified in Spain since 2009, namely the systemic banking crisis (2009 Q1 to 2013 Q4) and the systemic crisis triggered by COVID-19 (2020 Q1 to 2021 Q4). The “credit intensity” indicator is calculated as the annual change in lending to the non-financial private sector divided by cumulative GDP over the last four quarters. The non-financial private sector’s debt service ratio is calculated as specified in Castro C., Estrada A. y Martínez J. (2014) “The countercyclical capital buffer in Spain: an exploratory analysis of key guiding indicators”, BdE Financial Stability Review, November. The ranges depicted in the house price imbalances are minimums and maximums of a series of indicators of price developments in the residential real estate sector compared with its long-term trends (some of these indicators have been obtained via a statistical filter and others via econometric models).

Data download File CSV: Opens in new window (11 KB)