Countercyclical capital buffer
The countercyclical capital buffer aims to prevent and mitigate systemic risks of a cyclical nature. It targets the excess of credit cycle, either in upswing or downswing phase, and the resulting risk accumulation. This buffer requires additional capital to be provided from credit institutions in the phase of intensive credit growth, while credit institutions are allowed to release capital in the downward phase of the cycle.
The countercyclical capital buffer is allocated in the form of Common Equity Tier 1, and can range from 0% to 2.5% of the total amount of risk exposure. The countercyclical buffer rate may be higher than 2.5%, subject to exceptional circumstances.
The CBCG prescribes the countercyclical capital buffer rate for Montenegro, i.e. for exposures that credit institutions have to entities in Montenegro. In addition, credit institutions are required to calculate the specific countercyclical buffer rate, as the weighted average of the countercyclical buffer rate that is applied in Montenegro and those applied in other countries where the relevant credit exposures of the credit institution are located.
The CBCG sets the countercyclical capital buffer rate on quarterly basis and the rate is announced on its website.
In line with the Decision on the Countercyclical Capital Buffer Rate for the Fourth Quarter of 2022 (OGM 106/22), the countercyclical capital buffer rate amounts to 0% of the total amount of risk exposure.