General Studies · Basel III Framework & Macroprudential Regulation
The Countercyclical Capital Buffer (CCyB) is a key component of the Basel III framework. What is its primary function in the context of macroprudential regulation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1To provide a fixed, non-varying layer of capital that replaces the Capital Conservation Buffer (CCB) at all times.
- 2To ensure that banks prioritize short-term profitability over long-term capital stability during economic booms.
- 3To require banks to build up extra capital during periods of high credit growth that can be used to maintain the flow of credit during a downturn.✓
- 4To mandate the conversion of all subordinated debt into common equity whenever the national GDP growth rate falls below five percent.
Correct answer
To require banks to build up extra capital during periods of high credit growth that can be used to maintain the flow of credit during a downturn.
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