Hello Amarjeet, the capital conservation buffer ensures that banks raise capital levels during good times and then are able to draw them down when losses arise during stressed times, while still be able to operate above their regulatory minimums. The countercyclical buffer works as a macro-prudential constraint that supervisors can use to reduce excessive system-wide risk buildups during expansionary times.
These buffers are indeed a part of Basel 3. The Capital Conservation Buffer in some sense complements the PCA (the buffer allows the supervisor to intervene early and timely before capital levels fall below regulatory minimums).
*FRM Learning Objective:* Describe the motivations for and calculate the capital conservation buffer and the countercyclical buffer.
Excellent explanation, thank you for this 👍🏻
Awesome video, thanks!
Nice explanation. Many thanks.
Very beautifully explained. Thank you so much.
Thank you Mahalakshmi for the appreciation.
Nicely explained. Understood everything but what is the actual difference between them? I mean why need of such 2 buffers ?
Hello Amarjeet, the capital conservation buffer ensures that banks raise capital levels during good times and then are able to draw them down when losses arise during stressed times, while still be able to operate above their regulatory minimums. The countercyclical buffer works as a macro-prudential constraint that supervisors can use to reduce excessive system-wide risk buildups during expansionary times.
0:54 Isn't the CCB a part of Basel 3, and not PCA?
These buffers are indeed a part of Basel 3. The Capital Conservation Buffer in some sense complements the PCA (the buffer allows the supervisor to intervene early and timely before capital levels fall below regulatory minimums).
thank god, Finally I understodd which percent I have to apply and what they truly mean
Very good! Thank you very much!
Your voice 🔥