The countercyclical capital buffer (CCyB) that the Federal Reserve uses to increase the resilience of the financial system during times of heightened risk will remain at 0%, the Federal Reserve Board decided Friday.
The CCyB is deployed to raise capital requirements for large banking organizations when there is an elevated risk of above-normal future losses and those banks are exposed or contributing to that risk directly or indirectly. The buffer is intended to be used when economic conditions deteriorate, to support lending and economic activity.
In making its determination, the board followed the framework detailed in its policy statement for setting the CCyB for private-sector credit exposures located in the United States.
If the CCyB amount is modified in the future, the Fed said banking organizations would have 12 months before the increase became effective unless the board sets an earlier effective date.