Bank of Russia to discuss approaches to setting national countercyclical capital buffer with market

The Bank of Russia has prepared a report dedicated to determining the credit cycle stage and setting the national countercyclical capital buffer (CCyB) for credit institutions. The document was developed as part of perfecting approaches to macroprudential policy and published for consultations with market participants.

The report describes indicators that the Bank of Russia uses when making CCyB decisions, as well as alternative models.

Many countries have adopted positive countercyclical buffers in the recent years. The report summarises their experience: systemic risks tackled by such measures, drivers behind decision-making, and models used by regulators. The analysis shows that, in order to determine the credit cycle stage, regulators mostly take alternative approaches aside from the methodology recommended by the Basel Committee on Banking Supervision (BCBS). This is caused by its inadequate informational value for countries with structural shifts in economic and financial sector development.

The report contains a review of alternatives to the BCBS methodology and describes new approaches to the determination of the credit cycle stage developed by the Bank of Russia. The study revealed that alternative indicators could potentially be used to identify the overheating stage at the credit market in general and its individual segments.

The Bank of Russia plans to complete discussions of the report with the professional community and all parties concerned by 19 July 2019 inclusively. After consultations with experts, the Bank of Russia will be able to use said methodologies when setting the national countercyclical capital buffer.