Implementing the countercyclical capital buffer
The Basel Committee on Banking Supervision today published a Range of practices in implementing the countercyclical capital buffer policy. This document examines how a range of jurisdictions have implemented their countercyclical capital buffer (CCyB) policies. The CCyB was introduced by the Committee in 2010 as part of the Basel III reforms and has the macroprudential objective of protecting the banking sector from periods of excess aggregate credit growth that have often been associated with a build-up of system-wide risk.
The document draws on information from a survey conducted by the Committee and the website on CCyB decisions the Committee maintains. It details the various national CCyB policy frameworks and operational aspects, underlining the varying discretionary elements of jurisdictions' CCyB policy frameworks and practices.
The Committee's review highlights the importance of the implementation imperative of the Basel standards and helps to clarify implementation of domestic CCyB policies. It documents that CCyB policy frameworks differ markedly with respect to:
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their governance structures;
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the number of indicators used to identify periods of excess credit and systemic risk;
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the degree of reliance on formal versus judgmental approaches in making CCyB decisions; and
- their communication and reciprocity practices.
The document also 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.