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78.1

The Countercyclical Capital Buffer (CCyB)

What is the CCyB?

The CCyB is a part of the Basel III regulatory capital framework. In essence it is a mechanism to build up additional capital during periods of excessive credit growth when risks of system-wide stress are observed to be growing markedly. This capital can then be “released” when the credit cycle turns to absorb losses and enable the banking system to continue lending in the subsequent downturn.

The CCyB requirement is expressed as a percentage of an authorized institution’s risk-weighted assets and has to be met with common equity tier 1 capital (CET1) (the highest quality regulatory capital in terms of loss absorption).

Under the Basel III framework national authorities are required to “monitor credit growth and other indicators that may signal a build-up of system-wide risk and make assessments of whether credit growth is excessive and is leading to the build-up of system-wide risk” (Para 138(a) Basel III: A global regulatory framework for more resilient banks and banking systems (Rev. June 2011)).

Based on their assessment national authorities should put in place a CCyB requirement when circumstances warrant. Whilst the CCyB requirement remains in place it takes effect as an extension of an authorized institution’s Capital Conservation Buffer. This means that authorized institutions will not breach their continuing authorization criteria should their levels of CET1 capital fall within the extended buffer zone (in other words the buffer is not a “hard minimum” requirement which is not allowed to be breached) but they will be subject to restrictions on distributions of earnings for so long as they do not meet the extended buffer requirement.

Whilst regulatory capital requirements are imposed by national authorities on banks incorporated in their jurisdictions, the Basel Committee has established a jurisdictional reciprocity mechanism for the CCyB. In order to maintain a level playing field between domestic and cross-border banks, each national authority is responsible for ensuring that the banks incorporated in their jurisdiction (for which they are the home supervisor) calculate buffer requirements on the basis of the CCyB in place in the jurisdictions where they have private sector credit exposures.

Basel III provides for implementation of the CCyB from 1 January 2016. To implement the measure locally, the Monetary Authority has, through the Banking (Capital) (Amendment) Rules 2014, amended the Banking (Capital) Rules to incorporate provisions for the imposition of capital requirements arising from the operation of the CCyB, as well as from the Capital Conservation Buffer which also goes into effect from 1 January 2016.


Implementation of the CCyB in Hong Kong

SPM CA-B-1 Countercyclical Capital Buffer (CCyB) – Approach to its Implementation

SPM CA-B-3 Countercyclical Capital Buffer (CCyB) – Geographic Allocation of Private Sector Credit Exposures

Quarterly Bulletin article (September 2013) “Implementing the Basel III Countercyclical Capital Buffer”


Documents issued by the Basel Committee on Banking Supervision relating to the CCyB

Frequently asked questions on the Basel III Countercyclical Capital Buffer (October 2015)

Basel III: A global regulatory framework for more resilient banks and banking systems (rev June 2011)

Guidance for national authorities operating the countercyclical capital buffer (December 2010)


Latest applicable jurisdictional CCyB rates

Hong Kong (updated on 27 January 2017)

  • Currently in effect: 1.25%
  • Announced: 1.875% to become effective 1 January 2018.

Announcements by the Monetary Authority of applicable CCyB rate for Hong Kong

27 January 2017  -

CCyB Announcement

Press Release

14 January 2016  -

CCyB Announcement

Press Release

27 January 2015  -

CCyB Announcement

Press Release

CCyB Q&As

 


Historical time series on the applicable CCyB rate for Hong Kong

Downloadable Excel worksheet


Comprehensive Reference Indicators

Current list


Latest applicable jurisdictional CCyB rates

Overseas jurisdictions

Last revision date: 3 July 2017
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