On December 21, 2015, the Federal Reserve Board announced it is soliciting public comment on a proposed policy statement describing its framework for setting the Countercyclical Capital Buffer, a macroprudential tool that raises capital requirements on internationally active banking institutions when the risk of above-normal losses in the future is elevated. The CCyB, which applies to banking organizations that are subject to the advanced approaches capital rules (generally those with more than $250 billion in assets or $10 billion in on-balance-sheet foreign exposures) and to their depository institution subsidiaries, would aid such institutions in absorbing shocks in connection with declining credit conditions and help moderate fluctuations in the supply of credit. The proposed policy statement describes various financial-system vulnerabilities as well as issues for Federal Reserve Board consideration in setting the buffer, including leverage in the nonfinancial sector, leverage in the financial sector, maturity and liquidity transformation in the financial sector and asset valuation pressures. Calculations of the CCyB are based on private-sector credit exposures located in the US and, once fully phased in, the CCyB could range from 0 percent of risk-weighted assets to a maximum of 2.5 percent. Banks subject to the CCyB would face restrictions on capital distributions and the payment of discretionary bonuses if they fail to meet the buffer. The Federal Reserve Board, in consultation with the US Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, has voted to affirm the CCyB amount at the current level of 0 percent. The deadline for comment on the proposed policy statement is February 19, 2016.
The proposed policy statement is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151221b1.pdf and the appendix to the statement is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151221b2.pdf.