July 3, 2018 / 2:28 PM / 5 months ago

REFILE-UPDATE 1-Slovak central bank raises extra capital buffer to cool lending

 (Fixes story links in table)
    BRATISLAVA, July 3 (Reuters) - The Slovak central bank
announced on Tuesday the countercyclical capital buffer for
commercial banks will rise to 1.50 percent from Aug. 1, 2019,
the second such increase aimed at cooling fast credit growth.
    The buffer, under which banks set aside capital when the
economic cycle is strong to prepare for future downturns, has
been at 0.5 percent of their risk-weighted assets since August
last year. 
    The central bank had already announced in July last year
that the buffer would rise to 1.25 percent next month.

    Two years ago Slovakia became the first euro zone country to
introduce the buffer, seeking to tame a double-digit rise in
lending fuelled by record low interest rates and a hot real
estate market. Only a handful of other European states have the
charge, including the neighbouring Czech Republic. 
    Banks have one year to prepare for the next rise. With the
sector showing an average capital adequacy ratio of 18.6 percent
in 2017 - several percentage points above requirements for most
lenders - they should have no problems meeting that.    
    Slovenska Sporitelna, Slovakia's biggest bank which belongs
to the Austrian group Erste Bank, said it had been
expecting the rise and would be ready for it.
    The central bank had hinted at a further increase in May.
According to its latest data, loans to households grew 13.6
percent year-on-year in the first three quarters of 2017, the
fastest rate in the euro zone.
    Much of the lending is for home purchases. The central bank
is phasing in a limit on mortgage loans at eight times a
borrower's annual income and has banned loan-to-value credit
exceeding 90 percent as of this month.
    Slovak banks, including CSOB, Postova Banka, Tatra
Banka and VUB, are largely foreign-owned and
have avoided troubles seen by other banks in the decade since
the global financial crisis.

TABLE: European countries using the countercyclical capital
buffer      
 Country         Rate  Date effective  Latest story
 Czech Republic  0.50     Jan 1, 2017              
                 1.00    July 1, 2018              
                 1.25     Jan 1, 2019              
 Denmark         0.50  March 31, 2019              
 Iceland         1.00   March 1, 2017              
                 1.25     Nov 1, 2017              
                 1.75    May 15, 2019              
 Lithuania       0.50    Dec 31, 2018              
 Norway          1.00   June 15, 2015              
                 1.50   June 30, 2016              
                 2.00    Dec 31, 2017              
 Slovakia        0.50     Aug 1, 2017              
                 1.25     Aug 1, 2018              
                 1.50     Aug 1, 2019              
 Sweden          1.00   Sept 13, 2015              
                 1.50   June 27, 2016              
                 2.00  March 19, 2017              
 United Kingdom  0.50   June 27, 2018              
                 1.00    Nov 28, 2018              
    Source: Reuters; European Systemic Risk Board (ESRB), here
        

 (Reporting By Tatiana Jancarikova and Jason Hovet in Prague;
editing by David Stamp)
  
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