Fed Board votes to keep countercyclical capital buffer (CCyB) at 0%

The Federal Reserve Board, with Gov. Lael Brainard casting the lone “no” vote, on Tuesday decided to keep the countercyclical capital buffer (CCyB) applicable to large bank holding companies at the 0% level, the central bank announced Wednesday.

The buffer, the Fed said, can be used to increase the resilience of the financial system by raising capital requirements on internationally active banking organizations when there is an elevated risk of above-normal future losses and when the banking organizations for which capital requirements would be raised by the buffer are exposed to or are contributing to this elevated risk directly or indirectly. The buffer could also help moderate fluctuations in the supply of credit, it said. “The CCyB is designed to be released when economic conditions deteriorate, in order to support lending and economic activity more broadly,” the central bank noted.

The Fed said that in making its decision, it followed the framework detailed in the board’s policy statement for setting the CCyB for private-sector credit exposures located in the United States. It also consulted with the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC).

“Should the Board decide to modify the CCyB amount in the future, banking organizations would have 12 months before the increase became effective, unless the Board establishes an earlier effective date,” it said.

Also on Tuesday, the Fed Board decided (voting 4-1 here as well) to eliminate the “qualitative objection” for most firms subject to the Comprehensive Capital Analysis and Review (CCAR), effective in 2019.

Federal Reserve Board votes to affirm the Countercyclical Capital Buffer (CCyB) at the current level of 0 percent

RR: For 13 big financial firms, Fed won’t use ‘qualitative objection’ in 2019 CCAR cycle; full phase-out by 2021 (March 7, 2019)