Question

Under the Basel III guidelines, it is advised to create a countercyclical capital buffer of 0-2.5%. Which of the following is not true about this buffer:

A It is intended to protect the banking sector against losses on account of systemic risks
B It has to be used only when the credit growth in the economy is posing a system-wide risk
C It is infrequent in nature and is to be created only when the regulator assesses potential risk and sets a limit of buffer to be created by the banks
D The range of 0-2.5% means that it will be 0% when the capital conservation buffer is 2.5% and vice versa.
E None of the above
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