The Basel Committee on Banking Supervision (Basel Committee) has published a report, Range of practices in implementing the countercyclical capital buffer policy.
The primary objective of the countercyclical capital buffer (CCyB) is to build a varying capital buffer that protects the banking sector from periods of excess credit growth that are often associated with the build-up of systemic risk.
In 2010, the Basel Committee issued guidance for national authorities operating the countercyclical capital buffer. While this document provides key requirements for CCyB policies that national authorities should follow in designing their CCyB framework and making buffer decisions, national authorities retain considerable flexibility to design the particular details of their policies in a manner that best reflects specific national circumstances.
The report that the Basel Committee has now published examines how jurisdictions have used this flexibility in designing their CCyB policies, drawing on information from an internal survey completed by Basel Committee members as well as the website of CCyB decisions maintained by the Basel Committee itself.
The report notes that, among other things, CCyB policy frameworks differ markedly with respect to:
- their governance structures;
- the number of indicators used to identify periods of excess credit and systemic risk;
- the degree of reliance on formal versus judgmental approaches in making CCyB decisions; and
- their communication and reciprocity practices.
View Range of practices in implementing the countercyclical capital buffer policy, 22 June 2017