Range of practices in implementing the countercyclical capital buffer policy

The Basel Committee on Banking Supervision introduced the countercyclical capital buffer (CCyB) policy as part of the Basel III reforms. The countercyclical capital buffer aims to ensure that banking sector capital requirements take account of the macro-financial environment in which banks operate. Its primary objective is to use a buffer of capital to achieve the broader macroprudential goal of protecting the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risk.

In 2010, the Committee issued the 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 document on Range of practices in implementing the countercyclical capital buffer policy examines how jurisdictions have used this flexibility in designing their CCyB policies, drawing on information from a survey undertaken by the Committee as well as the website of CCyB decisions maintained by the Committee. It details the various national CCyB policy frameworks and operational aspects, underlining the varying discretionary elements of jurisidictions' CCyB policy frameworks and practices.

This document also highlights the importance of implementing the Basel standards and provides information on implementation practices related to CCyB policies. In particular, this document provides evidence that 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.

Furthermore, the final section of the report outlines some issues that were identified in the context of the cross-jurisdiction comparisons, which could be further discussed over the medium term as experience with the CCyB policy is gained.