Financial News: Central Bank Of Cyprus Raises Countercyclical Buffer Rate

Central Bank Of Cyprus Raises Countercyclical Buffer Rate To 1.5%

(RTTNews) - The Central Bank of Cyprus hiked the countercyclical buffer rate for financial institutions on Tuesday citing an increase in cyclical system risks and a rise in the reputational risk.

The CCyB rate on Cyprus exposures was raised to 1.5 percent from 1.0 percent. The new rate will take effect on January 14, 2026.

"At the same time, and despite the positive outlook for the economy, the likelihood of materialization of potentially severe tail events in the global economy that would significantly affect the domestic macroeconomic environment, and consequently the banking sector, has increased, mainly due to geopolitical developments and turbulence," the bank said.

"By increasing the CCyB rate, part of banks' profitability is channelled towards strengthening their resilience, creating a larger buffer of loss-absorbing capital in times of crisis and stress, thereby ensuring the uninterrupted supply of credit to the real economy," the bank added.

According to the Basel, Switzerland-based BIS, the countercyclical capital buffer aims to ensure that banking sector capital requirements consider the macro-financial environment in which banks operate.

The primary objective of CCyB is to use a buffer of capital to achieve the broader macroprudential goal of protecting the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risk, the BIS states in its website.

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