Banking · Basel III Framework
The Countercyclical Capital Buffer (CCCB) is a key macroprudential tool under the Basel III framework. What is its primary regulatory objective?
- 1To eliminate the need for Tier 2 capital by increasing the mandatory requirements for Common Equity Tier 1 capital.
- 2To ensure that banks maintain a specific Liquidity Coverage Ratio (LCR) during periods of idiosyncratic stress.
- 3To protect the banking sector from systemic risks associated with periods of excess aggregate credit growth.✓
- 4To provide a fixed layer of capital that banks must maintain at all times regardless of the credit cycle to simplify regulatory oversight.
Correct answer
To protect the banking sector from systemic risks associated with periods of excess aggregate credit growth.
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