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Guiding principles for the operationalisation of a sectoral countercyclical capital buffer

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Summary of document history   Previous version Previousconsultation This version Subsequentconsultation Subsequentversion This version BCBS  |  Guidelines  |  27 November 2019  |  Status:  Current PDF full text (335kb)  |  14 pages Topics: Macroprudential / systemic importance The Basel Committee on Banking Supervision's (BCBS) Basel III standard includes a countercyclical capital buffer (CCyB) regime. National authorities can implement a CCyB requirement to ensure that the banking system has an additional buffer of capital to protect against

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BCBS  | 
Guidelines
 | 
27 November 2019
 | 
Status:  Current
PDF full text
 (335kb)
 |  14 pages

The Basel Committee on Banking Supervision's (BCBS) Basel III standard includes a countercyclical capital buffer (CCyB) regime. National authorities can implement a CCyB requirement to ensure that the banking system has an additional buffer of capital to protect against potential future losses related to downturns in the credit cycle. 

A sectoral countercyclical capital buffer (SCCyB) is a useful complement to the CCyB. While a bank's additional capital requirements following the activation of the CCyB depend on total risk-weighted assets, a SCCyB is a more targeted measure allowing national authorities to temporarily impose additional capital requirements that directly address the build-up of risk in a specific sector. The impact of a SCCyB would depend on a bank's exposure to a targeted credit segment (eg, residential real estate loans). Targeted tools such as the SCCyB may be effective to aid in building resilience early and in a specifc manner, to more efficiently minimise unintended side effects, and may be used more flexibly than broad-based tools. 

These guiding principles are intended to support the implementation of a SCCyB on a consistent basis across jurisdictions. The guiding principles are not included in the Basel standards and are only applicable for those jurisdictions that choose to implement them on a voluntarily basis.

International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

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