Capital Conservation Buffer (CCB)

Article 129 of the Capital Requirements Directive (CRD) (2013/36/EU) deals with the set-up of a capital conservation buffer. This article has been transposed into Article 59-5 of the Law of 5 April 1993 on the financial sector (LFS). The capital conservation buffer is a capital buffer of 2.5% of an institution's total exposures that needs to be met with an additional amount of Common Equity Tier 1 capital. The buffer sits on top of the 4.5% minimum requirement for Common Equity Tier 1 capital. Its objective is to conserve an institution's capital. The capital conservation buffer is intended to ensure that firms build up buffers of capital outside any periods of stress and is designed to avoid breaches of minimum capital requirements. This capital buffer can then be drawn upon in times when losses are incurred. When an institution breaches the buffer, automatic safeguards apply to limit the amount of dividend and bonus payments it can make.


In Luxembourg, banks must have a capital conservation buffer of 2.5% from 1 January 2014 onwards. There has not been a transition phase for the implementation. Following CSSF Regulation N° 15-05, investment firms qualifying as small and medium-sized enterprises are exempted from the requirements to maintain a countercyclical capital buffer and a capital conservation buffer.

 

 

Useful links

CSSF Regulation N° 18-03 1) implementing certain discretions of Regulation (EU) No 575/2013 and implementing Guideline (EU) 2017/697 of the European Central Bank of 4 April 2017 on the exercise of options and discretions available in Union law by national competent authorities in relation to less significant institutions (ECB/2017/9) and 2) repealing CSSF Regulation N° 14-01

CSSF Regulation N° 15-05 on the exemption of investment firms qualifying as small and medium-sized enterprises from the requirements to maintain a countercyclical capital buffer and a capital conservation buffer