‘Sectoral’ counter-cyclical buffer could boost resilience, says Basel Committee
Targeted tool would have a narrower impact on segments of the market
The Basel Committee on Banking Supervision has set out guidance on a “sectoral counter-cyclical capital buffer” (SCCyB) that it says could be a useful, targeted tool for policy-makers to deploy.
While the adoption of such a tool is not a part of Basel III and is therefore voluntary, the BCBS says it could be a versatile tool for dealing with narrow imbalances. The document notes that while targeted macro-prudential tools do exist, they are often limited to certain sectors, notably real estate.
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