Financial Stability

Sectoral Systemic Risk Buffer

The Systemic Risk Buffer ("SyRB") is a macroprudential tool emanating from the CRR/CRD framework which in turn has also been transposed in the Central Bank of Malta Directive No. 11 on Macroprudential Policy. The SyRB can be used to address risks that are both cyclical and non-cyclical in nature and, concurrently, not addressed by other macroprudential tools including the Countercyclical Capital Buffer (CCyB) and Other Systemically Important Institution (O-SII) buffer. The SyRB can also be applied to a subset of exposures and/or institutions. These characteristics enhance the flexibility of the SyRB in addressing specific systemic risks and mitigate their potential to have serious negative consequences to the financial system and the real economy in a specific Member State.

The Central Bank of Malta in collaboration with the Malta Financial Services Authority (MFSA) under the auspices of the Joint Financial Stability Board (JFSB) decided to set a Sectoral Systemic Risk Buffer (sSyRB) of 1.5% which is to be applied on the amount of risk-weighted assets held against domestic mortgages exposures to natural persons and secured by residential real estate (RRE). Exposures also include buy-to-let loans (for residential purposes) secured by RRE, granted to natural persons. The sSyRB addresses potential risks emanating from the increasing concentration of the Maltese banking sector's exposures to mortgage loans. ECB and ESRB have also been notified and the relevant notification template has been sent to the ECB and ESRB on the 13th of February and 28th February, respectively.

Additional details on the implementation of the buffer, particularly, the magnitude and aim of the buffer, its scope and application, phase-in details and application date can be found on the 2023 Statement of Decision.