FRANKFURT (Dow Jones) – Bafin boss Mark Branson has defended the introduction of the countercyclical capital buffer for banks in the coming year. “If we have this rather pessimistic outlook for the economy, now is not the time to say that banks are free to act with less capital,” Branson said at the “Banking Summit” in Frankfurt. “In my view, that is illogical. The buffer is a risk provision for a possible crisis and we have possible crisis developments ahead of us”.
Banks must build up a countercyclical capital buffer of 0.75 percent of risk-weighted assets by February 1, 2023. The supervisors are reacting to the risk that banks will underestimate their credit risks, to increased interest rate risks and to the overvaluation of residential property prices.
“It’s a preventative measure,” Branson said. “That makes the system more robust. And we need a robust banking system.” There are no plans to change anything “until the markets show that we really are in a different phase.”
Branson currently sees the biggest risk for the banks in the development of loans for companies. It is “extremely difficult to read” how much the risks for the banks are increasing there and where exactly in their portfolios. But the Bafin also keeps an eye on interest rate developments and the real estate market.
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(END) Dow Jones Newswires
September 07, 2022 05:42 ET (09:42 GMT)