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German banks could face 0.25% countercyclical capital buffer requirement

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German banks could face 0.25% countercyclical capital buffer requirement

Germany's financial stability board has suggested introducing a 0.25% countercyclical capital buffer for banks, which will see the country's banking sector hold back an additional €5.3 billion to make sure lending does not get affected in the event of an economic downturn, Reuters reported May 27, citing BaFin President Felix Hufeld.

Jörg Kukies, state secretary at Germany's federal ministry of finance, told a news conference that the move is precautionary in nature, and maintained that Germany's financial stability was currently not under risk, the newswire noted.

The countercyclical capital buffer is used to protect the banking sector against losses that could be caused by cyclical systemic risks. Banks are given 12 months to implement the changes in the buffer, starting July 1, Hufeld reportedly added.