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2.2 Capital Buffers:

C 52/2017 STA Effective from 1/12/2022

14.Article (5.1) of Capital Adequacy Regulation requires banks to maintain a capital conservation buffer (CCB) of 2.5% of total risk weighted assets, in the form of CET1 capital.

15.Article (6) of Capital Adequacy Regulation requires banks to implement a countercyclical buffer (CCyB). Banks must meet the CCyB requirements by using CET1 capital exclusively. Banks will be subject to a countercyclical buffer that varies between zero and 2.5% of total risk weighted assets. The buffer that will apply to each bank will reflect the geographic composition of its portfolio of credit exposures. The CCyB buffer extends the capital conservation buffer (CCB).

16.Domestic Systemically Important Banks (D-SIBs) are required to comply with article (7) of the Capital Adequacy Regulation. The additional requirements for identified D-SIBs will be communicated individually by the Central Bank to each relevant bank. Banks must meet the D-SIB buffer requirements by using CET1 capital. The D-SIB buffer extends the capital conservation buffer (CCB).

17.Based on the outcome of the Supervisory Review and Evaluation Process (SREP) conducted by the Central Bank, a bank may be subject to an additional capital add-on, also referred to as individual Supervisory Capital Guidance requirement (SCG). Banks notified must apply the individual SCG requirement, as set by the Central Bank. The Individual SCG increases the minimum capital requirement.

18.The aggregation of all the capital buffers (CCB, CCyB and D-SIB) form an effective capital conservation buffer. Any breach of the capital conservation buffers will lead to the following additional supervisory requirements and constraints on distributions:

  1. i.The relevant bank must immediately inform the Central Bank of the breach.
  2. ii.The relevant bank shall submit an approved plan to restore its regulatory capital to meet the buffer level requirement.
  3. iii.The relevant bank will be subjected to more intense supervision.
  4. iv.Capital conservation restrictions will immediately become effective in the form of restriction of dividends as prescribed by the Central Bank.