DNB maintains Countercyclical Capital Buffer at 1% – March 2023

Background information

The purpose of the CCyB is to increase banks' resilience as cyclical systemic risks build up, and to release the buffer as soon as such risks materialise. This gives banks additional headroom to absorb losses in bad times, and allows them to continue supporting lending to businesses and consumers. This can limit the immediate impact of a crisis on the real economy. The CCyB applies to domestic exposures and has a mandatory reciprocity of up to 2.5%. Foreign banks with exposures in the Netherlands must also comply with the Dutch 1% CCyB requirement.

CCyB framework DNB

In accordance with our framework for setting the CCyB, we aim for a 2% CCyB in a “standard” risk environment, i.e. a situation where cyclical systemic risks are neither particularly high nor particularly low. In doing so, we seek to better reflect the inherent uncertainty involved in measuring (cyclical) systemic risks. We set the level of the CCyB on the basis of a varied set of indicators (including the credit-to-GDP gap shown in Chart 1) that interpret the phase of the cyclical systemic risks and compare it with a structural trend (Table 1).

Current risk picture

Since our last decision on the CCyB, the picture painted by the CCyB framework macroeconomic indicators has changed to a limited extent: economic growth remains modest, consumer and business confidence remain low and inflation is still high. In addition, the real estate market continues to be the main source of cyclical vulnerabilities in the Netherlands, with house prices – despite recent signs of cooling – remaining historically high for now. Financial markets have been turbulent in the first quarter of 2023, which could pose cyclical risks. It is worth noting that Dutch banks have increased their resilience in recent years and are in good shape for now.

CCyB Decision

Against this background, we see no reason for the time being to deviate from our earlier decision to activate a 1% CCyB from 25 May 2023. Indeed, the CCyB helps to ensure that the financial system remains resilient in the face of current uncertainties. The accumulation of a 1% CCyB in the Netherlands is a first step towards the 2% CCyB that we want banks to hold in a standard risk environment. We will continue to closely monitor the risk picture and we stand ready to adjust the buffer requirement if the risk picture and market conditions warrant such adjustment. 

Figure 1 - The credit gap for the Netherlands and the corresponding buffer guide*

* Based on data series from 1960Q1 to 2022Q3. The trend was computed based on an HP filter. Source: Statistics Netherlands, DNB

Table 1: Core indicators for the CCyB framework*

* An explanation and substantiation of the set of indicators can be found in DNB's CCyB framework (see here). Source: BIS, Statistics Netherlands, DNB, ECB, Refinitiv.