Countercyclical provisioning buffers and floating provisions broadly refer to the specific amount that banks need to set aside in good times above the mandatory provisioning requirement as prescribed by RBI; these are used only in contingencies or extraordinary times of economic or system-wide downturns.

The Countercyclical Capital Buffer (CCyB) is a time varying capital requirement which applies to banks and investment firms. By increasing regulatory capital requirements in line with the cyclical systemic risk environment, the CCyB looks to ensure additional capital is in place to absorb losses when risks materialise.

The Basel III countercyclical capital buffer is calculated as the weighted average of the buffers in effect in the jurisdictions to which banks have a credit exposure. It is implemented as an extension of the capital conservation buffer.

(Reuters) – The U.S. Federal Reserve Board voted Friday to keep its countercyclical capital buffer at zero percent, saying it would not order banks to hold additional capital to protect against losses in a future economic downturn. The Fed said it made the decision after consulting with other bank regulators.

countercyclical in American English (ˌkaʊntərˈsɪklɪkəl ) adjective. designating or of fiscal policy that attempts to minimize extreme fluctuations in the business cycle, as by increasing spending and reducing taxes during periods of decline.

Capital buffers identified in Basel III reforms include countercyclical capital buffers, which are determined by Basel Committee member jurisdictions and vary according to a percentage of risk-weighted assets, and capital conservation buffers, which are built up outside periods of financial stress.

The aim of asking to build conservation buffer is to ensure that banks maintain a cushion of capital that can be used to absorb losses during periods of financial and economic stress. Countercyclical Buffer: This is also one of the key elements of Basel III.

The countercyclical capital buffer (CCyB) is part of a set of macroprudential instruments, designed to help counter pro-cyclicality in the financial system. This will help maintain the supply of credit and dampen the downswing of the financial cycle.

Counter-cyclical fiscal policy refers to the steps taken by the government that go against the direction of the economic or business cycle. Thus, in a recession or slowdown, the government increases expenditure and reduces taxes to create a demand that can drive an economic boom.

Floating provisions are the amount that banks set aside that are above the mandatory provisioning requirement against bad loans established by the central bank. Earlier, banks were allowed to use 33 per cent or one-third of their provisioning buffer for specific provisions for bad loans or non-performing assets.

Countercyclical capital buffer (CCyB) The Basel III countercyclical capital buffer is calculated as the weighted average of the buffers in effect in the jurisdictions to which banks have a credit exposure. It is implemented as an extension of the capital conservation buffer. It consists entirely of Common Equity Tier 1 capital and,…

The countercyclical buffer regime was phased-in in parallel with the capital conservation buffer between 1 January 2016 and year-end 2018 and became fully effective on 1 January 2019.

A capital buffer is mandatory capital that financial institutions are required to hold in addition to other minimum capital requirements. Regulations targeting the creation of adequate capital buffers are designed to reduce the procyclical nature of lending by promoting the creation of countercyclical buffers as set…

1 A capital buffer are required reserves held by financial institutions put in place by regulators. 2 Capital buffers were mandated under the Basel III regulatory reforms, which were implemented following the 2007-2008 financial crisis. 3 Capital buffers help to ensure a more resilient global banking system.