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      Question

      The Basel III framework introduced a new capital buffer

      called the Countercyclical Capital Buffer (CCyB). What is its primary purpose?
      A To protect banks against losses from market risk. Correct Answer Incorrect Answer
      B To ensure banks have capital to absorb losses during periods of excessive credit growth. Correct Answer Incorrect Answer
      C To provide capital for operational risk. Correct Answer Incorrect Answer
      D To maintain liquidity during a crisis. Correct Answer Incorrect Answer

      Solution

      The Countercyclical Capital Buffer (CCyB) is designed to ensure that banking sector capital requirements take account of the macro-financial environment in which banks operate. It is accumulated during periods of high credit growth to be drawn down during periods of stress, thereby promoting resilience.

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