Federal Reserve Approves Policy Statement On Countercyclical Capital Buffer

The Board of Governors of the Federal Reserve System (the "Board") unanimously approved a final policy statement that describes the framework that the Board will follow in setting the U.S. countercyclical capital buffer ("CCyB"). The CCyB is a tool that allows the Board to gradually raise capital requirements for banking organizations that are subject to the advanced approaches capital rules, savings and loan holding companies and state member banks "when the risk of above-normal losses is elevated." By requiring institutions to hold a larger capital buffer during periods when systemic risk is increasing and reducing the buffer requirement as vulnerabilities diminish, the CCyB has the potential to moderate fluctuations in the supply of credit over time.