Statement on the countercyclical capital buffer by the German Financial Stability Committee
- In recent weeks, there have been dynamic developments in events connected with the continued spread of COVID-19. The impact on the real economy is difficult to gauge. The losses seen in financial markets over the past few weeks are related to this uncertainty.
- The measures taken to slow the spread of COVID-19 have led to a drop in demand in numerous economic sectors. The fiscal policy measures adopted by the Federal Government – e.g. to make short-time working benefits more flexible and supply unlimited liquidity to affected enterprises – ensure that enterprises can meet their financial obligations.
- The German banking system is well capitalised overall and there is no evidence of liquidity strains. Under the regulatory reforms following the financial crisis, considerable buffers have been built up over the past few years, to be used in situations such as this.
- Given the anticipated need for credit in the real economy, BaFin intends to lower the countercyclical capital buffer from 0.25% to 0% as of 1 April 2020. This preventive measure will strengthen the German banking sector’s ability to lend. The buffer is to remain at 0% until at least 31 December 2020. The Financial Stability Committee welcomes the lowering of the countercyclical capital buffer. The current situation in the real economy underlines the importance of buffers in the financial system, which can be used up in periods of stress.
- The intended lowering of the buffer is anchored in the fiscal, monetary policy and supervisory measures coordinated at the European level, which aim to ensure the supply of capital and liquidity to the real economy.