Countercyclical buffer

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A macroprudential capital adequacy requirement for a capital cushion to allow and compensate for procyclical effects.

Countercyclical buffers are imposed under Basel III within a range of 0% to 2.5%, subject to national supervisors' determinations.

The idea is that the buffer is:

  • Built up during times when economic conditions are favourable; and
  • Reduced during a downturn, to free up capital.

The rate initially set by the UK's Financial Policy Committee (FPC) for the UK exposures of institutions incorporated in the UK was 0%.

Sometimes written 'CounterCyclical Buffer'.

See also