About the countercyclical capital buffer
The countercyclical capital buffer can be implemented when systemic risks are rising. This is typically in periods of very high credit growth. When the countercyclical capital buffer is introduced, the capital requirement for the credit institutions is increased.
The purpose of the buffer is to facilitate the scope for credit institutions to maintain suitable credit extension in periods of stress in the financial system. The buffer is first and foremost an instrument to increase the resilience of credit institutions. The buffer should not be regarded as an instrument to influence cyclical fluctuations. If the financial system is exposed to stress, the buffer requirement may be reduced, and the institutions may use the capital to, inter alia, absorb losses.
The Systemic Risk Council will assess the level of the buffer rate on an ongoing basis. When the buffer rate is changed, the Council will publish a recommendation addressed to the Danish Minister for Business. The Minister is responsible for determining the buffer rate on credit exposures in Denmark every quarter.
The data underlying the key indicators, which the Council monitors in its assessment of the buffer rate, are published quarterly. In addition to the key indicators the Council also takes other information into account, such as other indicators and other policy measures. The Council's approach to assessing the buffer rate is described here.