Published: 21.12.2022 Updated: 15.01.2024

Countercyclical capital buffer (hereinafter – CCyB) aims at strengthening the capitalisation of credit institutions during the neutral and upward phases of the financial cycle so that they have sufficient loss absorption capacity in times of crisis. When risks materialise, full or partial release of the CCyB rate helps the credit institutions to continue providing of the financing to the economy, thereby reducing the duration of crises and mitigating their impact on the economy.

The CCyB rate is expressed as a percentage of the total value of the exposures to the Latvian residents in a range from 0% to 2.5% (in justified cases, a higher CCyB rate above 2.5% may also be set). The CCyB requirement must be met with Common equity tier 1 capital.

Pursuant to the Credit Institution Law, Latvijas Banka assesses the cyclical systemic risk on a quarterly basis and, where necessary, establishes or adjusts the set CCyB rate. On 18.12.2023 Latvijas Banka decided to start implementing an application of positive neutral CCyB approach. According to this approach, the CCyB rate is maintained at a certain base level above zero already in a standard risk environment or in the neutral phase of the financial cycle when the cyclical systemic risk is neither heightened nor significantly low. Latvijas Banka has set the appropriate CCyB base rate at 1%.

 

The effective CCyB rate for exposures with Latvia's residents

Date of the decision CCyB rate In force since
27 April 2021 decision 0% 1 May 2022
18 December 2023 decision 1% 18 December 2024 (0/5% phase-in period)
18 June 2025 (1%)

The assessment of the cyclical systemic risk and the adequacy of the CCyB rate is carried out and published in the last month of every quarter to include the latest data on previous calendar quarters’ GDP and associated indicators.

As of 19 May 2021, when pursuant to the revised Capital Requirements Directive (CRD) amendments to the Credit Institution Law took effect changing the procedure for setting the CCyB rate, any decisions on the CCyB rate are taken only when the CCyB rate is changed. Where it remains unchanged, the assessment of the cyclical systemic risk and the adequacy of the applicable CCyB rate is published for the respective quarter.

The latest decision on the CCyB rate of 1% (effective as of 18 June 2025 and 0.5% phase-in CCyB rate as of December 2024) was taken on 18 December 2023, when Latvijas Banka decided to start pursuing an application of the positive neutral CCyB approach.

Credit Institution Law (Sections 35.4 – 35.8) 

Financial and Capital Market Commission's Regulation No 137 "Regulations on calculating the institution-specific countercyclical capital buffer rate" of 25 August 2020

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (CRD) (Articles 130, 135–140 and 160)

Recommendation of the European Systemic Risk Board of 18 June 2014 on guidance for setting countercyclical buffer rates (ESRB/2014/1)

Commission Delegated Regulation (EU) No 152/2014 of 4 June 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards on the identification of the geographical location of the relevant credit exposures for calculating institution-specific countercyclical capital buffer rates

Commission Implementing Regulation (EU) 2021/637 of 15 March 2021 laying down implementing technical standards with regard to public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 of the European Parliament and of the Council and repealing Commission Implementing Regulation (EU) No 1423/2013, Commission Delegated Regulation (EU) 2015/1555, Commission Implementing Regulation (EU) 2016/200 and Commission Delegated Regulation (EU) 2017/2295