Regulatory Alerts2015-12-16
The Countercyclical Capital Buffer in Germany: Analytical Framework for the Assessment of an Appropriate Domestic Buffer Rate
The Deutsche Bundesbank and BaFin issued this framework to define the methodology for setting Germany's domestic countercyclical capital buffer rate, which requires banks to hold additional common equity Tier 1 capital during periods of excessive credit growth. The approach employs a principle of guided discretion where a rule-based buffer guide derived from a national credit-to-GDP gap serves as the starting point for assessing systemic risks. Supervisors must also evaluate a comprehensive set of supporting indicators, including real estate market data and private sector debt burdens, to determine the final buffer rate and ensure transparency.
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