Systemic Risk Buffer (SRB)

The systemic risk buffer (SRB) is a macro-prudential instrument designed to prevent and mitigate systemic risks of a long-term, non-cyclical nature, which present a potential of contagion to the financial system and the real economy, and are not covered by the Capital Requirements Regulation (CRR) (575/2013). The SRB is introduced into EU law by Article 133 of the Capital Requirements Directive (CRD) (2013/36/EU). At the national level, Article 59-10 of the Law of 5 April 1993 on the financial sector (LFS) establishes the CSSF as the designated authority in charge of setting the systemic risk buffer rate applicable in Luxembourg. The CSSF may only act pursuant to this article after an opinion has been adopted by the Comité du Risque Systémique. The Comité du Risque Systémique (CdRS) shall review this opinion at least every second year. Where the CSSF acts in accordance with this article, it shall take the decisions after consultation with the Banque Centrale du Luxembourg (BCL). This systemic risk buffer must be of at least 1% based on the exposures to which the systemic risk buffer applies, which may apply to exposures in Luxembourg as well as to exposures in third countries. No maximum limit applies to this buffer. When requiring a systemic risk buffer to be maintained the CSSF shall comply with the following: (a) according to the assessment of the CdRS, the systemic risk buffer must not entail disproportionate adverse effects on the whole or parts of the financial system of other Member States or of the European Union as a whole forming or creating an obstacle to the functioning of the internal market; (b) the systemic risk buffer must be reviewed by the CSSF at least every second year. So far, the SRB has not been activated yet.