- Basel Committee has published a range of practices report on implementing a positive neutral countercyclical capital buffer (CCyB).
- An increasing number of jurisdictions have voluntarily chosen to introduce a positive neutral CCyB when risks are judged to be neither subdued nor elevated.
- The report considers the different jurisdictional frameworks for implementing a positive neutral CCyB.
The Basel Committee on Banking Supervision (BCBS) issued a range of practices report on implementing a positive neutral CCyB. Since 2010, an increasing number of jurisdictions have chosen to voluntarily introduce a positive neutral CCyB, ie a non-zero CCyB, when risks are judged to be neither subdued nor elevated.
This current report builds on prior BCBS publications by examining the observed range of practices adopted by jurisdictions which have chosen to implement a positive neutral CCyB. It considers the different jurisdictional frameworks for implementing a positive neutral CCyB, describes the various observed approaches to the calibration and operation of the buffer, and discusses reciprocity considerations.
Authorities that have introduced a positive neutral CCyB have found it helpful for banks in their jurisdictions to have buffers of capital in place that can be released in the event of sudden shocks, including those unrelated to the credit cycle, such as the Covid-19 pandemic.
The adoption of a positive neutral CCyB approach is not required and the report does not seek to discuss or opine on the merits or demerits of a positive neutral CCyB relative to other macroprudential measures or tools. Some jurisdictions may use tools other than the positive neutral CCyB to address similar risks, based on their specific jurisdictional circumstances.