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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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