Recommendation FMSB/1/2021: guidance on applying the countercyclical capital buffer (CCyB)

27th meeting, March 9, 2021

In line with Article 23a para. 1 of the Austrian Banking Act, the Financial Market Stability Board (FMSB) recommends that the Financial Market Authority (FMA) leave the countercyclical capital buffer (CCyB) unchanged at a rate of 0% of risk-weighted assets from July 1, 2021. The main indicator guiding decisions from a technical perspective, namely the credit-to-GDP gap, which reflects credit volume relative to GDP, is positive, but this result is based on the exceptionally strong decline in GDP growth (−0.9% between the second and third quarters of 2020). At the same time, domestic credit did not record excessive growth rates (+0.5% between the second and third quarters of 2020). According to Baba et al. (2020)1, Drehmann et al. (2011)2 and Drehmann et al. (2014)3, there is no case for changing the CCyB mechanistically in line with a given credit-to-GDP gap, in particular when this gap is caused by a negative business cycle.

1 How Should Credit Gaps Be Measured? An Application to European Countries. IMF Working Paper No. 20/6.
2 Anchoring countercyclical capital buffers: the role of credit aggregates. BIS Working Papers.
3 The credit-to-GDP gap and countercyclical capital buffers: questions and answers. BIS Quarterly Review.