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Cyprus Central Bank Holds Countercyclical Buffer Rate Steady at 1%

Stability in the Financial Sector: CBC Holds Firm on Buffer Rate

In a move signaling confidence in the economic stability of Cyprus, the Central Bank of Cyprus (CBC) has announced that it will hold the countercyclical buffer rate at 1 per cent. This decision, which comes into effect on June 2, 2024, aligns with the bank’s commitment to prudent macroprudential oversight.

The CBC’s adherence to the Macroprudential Supervision of Institutions Laws, spanning from 2015 to 2022, underscores its dedication to maintaining a robust financial system. By keeping the buffer rate steady, the CBC aims to provide a safeguard against potential fluctuations in credit growth and to ensure a stable banking environment for both consumers and businesses alike.

This latest announcement follows a previous decision made on June 2, 2023, which set the groundwork for the current buffer rate policy. Since November 30, 2023, institutions have been operating with a buffer rate of 0.5 per cent. The upcoming increase to 1 per cent is a calculated step that reflects the CBC’s ongoing evaluation of economic indicators and risk assessments.

The countercyclical buffer rate is a key tool in the CBC’s macroprudential toolkit. It is designed to accumulate capital during periods of high economic growth, which can then be released during downturns to support lending and mitigate the risk of a credit crunch. With this proactive approach, the CBC continues to fortify Cyprus’s financial sector against future economic challenges.

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Cyprus Central Bank Holds Countercyclical Buffer Rate Steady at 1%

Stability in the Financial Sector: CBC Holds Firm on Buffer Rate