Why Capital Conservation Buffer?

The Capital Conservation Buffer is intended to ensure that firms build up buffers of capital outside any periods of stress and is designed to avoid breaches of minimum capital requirements. This capital buffer can then be drawn upon in times when losses are incurred.

What are capital buffers?

Capital buffers aim to enable banks to absorb losses while maintaining the provision of key services to the real economy, while automatic restrictions on distributions prevent the imprudent depletion of capital in times of stress.

What is capital conservation buffer and countercyclical capital buffer?

The countercyclical capital buffer aims to ensure that banking sector capital requirements take account of the macro-financial environment in which banks operate. ... Consistent with the capital conservation buffer, the constraints imposed relate only to capital distributions, not the operation of the bank.