Countercyclical capital buffer

Published: 8/11/2017 Modified: 29/3/2024
The countercyclical buffer is a releasable macroprudential instrument used to counter procyclicality in bank lending and mitigate risks to the stability of the financial system.

Exposure to cyclical systemic risks, which usually become apparent only after the cycle reversal, increases during the upward phase of the financial cycle. Countercyclical buffer (CCyB) build-up in the upward phase of the financial cycle ensures timely allocation of additional capital. This, in turn, enables credit institutions to absorb losses and maintain lending activity more easily in the downward phase of the financial cycle or in case of a sudden crisis.

As of 31 December 2023, the countercyclical buffer rate to be applied is 1%. As of 30 June 2024, the rate applied will increase to 1.5%.

Overview of decisions on the countercyclical buffer rate

Date of decision adoption Date of entry into force Level of the rate  
19 January 2015 1 January 2016 0%  
28 March 2022 31 March 2023 0.5%  
15 December 2022 31 December 2023 1.0% Currently applied
30 June 2023 30 June 2024 1.5% Announced


Announcement on maintaining the announced countercyclical buffer rate for the Republic of Croatia at 1.5%

As bank lending continues to increase and residential real estate prices show visible signs of stabilising at high levels, the domestic financial cycle remains in a mature phase of expansion, which is characterised by an elevated level of accumulated systemic vulnerabilities. As a result, the Croatian National Bank has estimated that the countercyclical buffer rate of 1.5% announced in June 2023 remains appropriate for preserving banking system resilience to a possible systemic risk materialisation or sudden shocks. Relevant information pursuant to Articles 119 and 123 of the Credit Institutions Act is given below.

Specific credit gap indicators for the Republic of Croatia (Figure 1) and the composite indicator of the cyclical systemic risk (Figure 2), which comprises a larger group of indicators connected with developments in the financial cycle, remained elevated in the third quarter of 2023 (Table 1). Household lending continued to accelerate, with total loans to households in January rising by 10.4% on an annual level (transaction-based). Housing loans recorded a further sharp increase, with their annual growth rate standing at 10.5% in January, while the annual growth rate of general-purpose cash loans accelerated further to 12.2%. Lending to non-financial corporations remains subdued and the slowdown in the annual growth rate of these loans to 3.4% in January largely reflects the repayment of a large syndicated loan by a company from the energy sector. The residential real estate market, while recording a fall in activity, showed signs of price stabilisation, with its quarterly growth rate standing close to zero and its annual growth rate decelarating for the third consecutive quarter, standing at 10.9% at the end of September 2023.

Against such a background, the CNB will continue to pursue a macroprudential policy aimed at preserving banking system resilience. The announced countercyclical buffer rate will thus remain unchanged at the level of 1.5% effective of 30 June 2024 and until then the rate of 1% will apply. As the designated macroprudential body, the CNB will continue to monitor regularly the evolution of cyclical systemic risks against the backdrop of domestic and global economic and financial developments, so as to be able to timely adjust, if needed, the countercyclical buffer rate.

Table 1 Indicators of cyclical systemic risk and the associated benchmark countercyclical buffer rates for the third quarter of 2023

Notes: Specific ratio values differ depending on the definition of credit (48.2% for a narrow definition of credit, which includes only domestic bank credit, and 63.1% for a broad definition). Differences in gap values arise from different definitions of gap (absolute gap is calculated as the difference while the relative gap is calculated as the ratio of the following variables: the credit-to-GDP ratio and its trend) and estimated statistical trends.
Source: CNB.

Figure 1 Range of credit gap indicators and affiliated benchmark CCyB rates

Notes: The left panel shows the Basel gap (blue curve) and the range of 12 credit gap indicators which have better signalling properties for the Republic of Croatia than the Basel gap. The red shaded areas indicate the range of absolute gaps, while the black shaded areas indicate relative gaps. The right panel shows the range of CCyB rates calibrated on the basis of the gaps in the left panel. The blue dashed curve indicates the calibration based on the Basel gap given in the left panel. For details on the methodology used to estimate credit gaps, see Box 2 Improvements in the methodology of countercyclical buffer identification and calibration in Croatia, Macroprudential Diagnostics No. 16

Figure 2 Composite indicator of the cyclical systemic risk (ICSR) and the affiliated range of benchmark CCyB rates

Notes: CI indicates credit institutions. The lower threshold for the calibration of the CCyB rate has been chosen to enable the rate to become positive before indicators included in ICSR calculation (Figure 2.a) reach median level, while the upper threshold is determined by the highest percentiles of ICSR distribution.
Source: CNB.




Decision on amendments to the Decision on the countercyclical buffer rate (OG 72/2023), (30/6/2023)

Decision on the countercyclical buffer rate (OG 148/2022), (16/12/2022)

Decision on the countercyclical buffer rate (OG 39/2022), (28/3/2022)

Decision on the countercyclical buffer rate (OG 9/2015), (19/1/2015)