Requirement for banks to accumulate additional capital reserve remains effective
In view of the recent financial and economic trends, as well as credit and real estate (RE) market dynamics, the Board of the Bank of Lithuania resolved not to change its decision taken half a year ago to set the countercyclical capital buffer (CCyB) rate at 1% from 30 June 2019. The 0.5% CCyB rate, set at the end of 2017, will come into effect on 31 December 2018.
As credit and RE market activity remains robust, banks’ profitability is healthy, the economy is showing a rapid growth, it is the right time to increase the capital buffer to withstand potential adverse shocks in the future.
The Bank of Lithuania revises the CCyB rate on a quarterly basis in view of the credit and RE market situation. The main purpose for applying this financial stability measure is to hold a sufficient capital buffer for the banking system to cover potential bank losses in case of cyclical systemic risk or during an economic downturn.