National Bank of Belgium research points to limited value of sector-specific capital buffers alongside the CCyB in Belgium

The National Bank of Belgium has published an Economic Review article assessing whether sector-specific capital requirements still add value alongside broader macroprudential buffers such as the countercyclical capital buffer. Set against the debate on simplifying the post-crisis capital buffer framework, the article finds that in Belgium’s universal banking system, broad-based releasable buffers can often address cyclical systemic risk as effectively as sector-specific tools, suggesting limited gains from retaining sectoral buffers as a standard part of the toolkit. The analysis finds that household and non-financial corporate credit and financial cycles may be only weakly synchronised in normal periods, but that synchronisation rises sharply in stress periods. When sectoral risks materialise, they tend to spill over to the wider economy, and Belgian banking sector features including differences in sectoral risk weights, long-term fixed-rate lending and a universal banking structure amplify those spillovers. Against that backdrop, the article argues for cautious and sparing use of sectoral capital tools, reserved for clearly identified and contained sector-specific risk build-ups, while broader buffers such as the CCyB appear more operationally robust for Belgium. It also notes that the National Bank of Belgium recently folded the specific buffer for mortgage loans into the broader CCyB.