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What is Understanding the Countercyclical Capital Buffer about?

The Countercyclical Capital Buffer (CCyB) is a macroprudential regulation under Basel III aimed at ensuring banks maintain extra capital during economic booms to absorb losses during downturns. Regulators adjust the CCyB based on the Credit-to-GDP Gap, with a positive gap indicating the need for a higher buffer. Non-compliance with CCyB requirements restricts banks from discretionary capital distributions, which helps prevent a credit crunch during recessions.

Author

Shyam Thakur

Language

EN