BaFin issued a general decree that lowers the required quota for the domestic countercyclical capital buffer to 0 per cent.
Following its quarterly assessment of the quota for anticyclical capital buffers, Germany’s Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin) reduced this quota to zero per cent. This reduction shall contribute to financial stability during the COVID-19 health and economic crisis. The anticyclical capital buffer serves explicitly for the purpose to be sapped during crises. Built in times of economic stability and growth, banks are allowed to use the capital stocked in this buffer to mitigate losses and continue granting loans to the real economy.
Credit institutions and financial services institutions must meet certain capital requirements (e.g. following CRR (Regulation (EU) 575/2013) and section 10 paragraphs 3 and 4 and section 10c (capital sustainment buffer) of the German Banking Act (Kreditwesengesetz – KWG)).
Some additional core capital must be sustained for a organisation-specific anticyclical capital buffer following section 10d KWG. This specific anticyclical capital buffer comprises several geographic quotas mapping the organisations individual risk exposures.
The quota for the domestic anticyclical capital buffer can amount between zero and 2.5 per cent, and refers to the sum of total receivables according to the CRR (article 92, paragraph 3 CRR). BaFin sets the quota in steps of .25 per cent and reassess it on a quarterly basis.
The reduction of the anticyclical capital buffer does not affect in any way the minimum capital requirements set for the respective credit of financial services institution.