NBS Raises Countercyclical Capital Buffer Rate

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NBS headquarters. (Stock photo by TASR)

Bratislava, July 26 (TASR) – Banks active in Slovakia will have to comply with stricter regulatory rules, having their countercyclical capital buffer set at 0.5 percent of risk-weighted assets effective as of August 1, 2017, the Slovak central bank (NBS) Bank Board decided on Tuesday.

The Slovak central bank has been the first in Eurozone to increase the mandatory capital buffer from zero for banks under its supervision.

“Most banks’ liabilities come from their creditors, including deposits of households and companies. Meanwhile, capital, i.e. a bank’s equity belongs to its owner. Only the bank’s capital is able to absorb losses. The higher capital, the better the bank is able to cope with losses. This makes the bank safer. A better capitalised banking sector is more stable and better able to provide loans,” said NBS’s Macroprudential Policy Department director Marek Licak.

If problems emerge, the bank should use the capital buffer to cover losses. If the bank is already in red figures, it isn’t obliged to meet the requirement for a capital buffer. Nonetheless, financial houses in a good condition have to comply with the requirement, otherwise the paying of dividends and bonuses could be blocked.

Also, the Bank Board approved a decree on the annual and semi-annual reports reports submitted by pension fund management companies (PFMCs), as well as supplementary pension management companies (SPMCs). It lays down the scope, content, structure and form, and the method and place of submission of their annual and semi-annual reports on the portfolio of management of pension funds and management of their own assets. The decree will enter into force on Monday, August 15, 2016.