Capital conservation Buffer

  • September 30, 2020
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Subject: Economy

Context:

  • RBI defers CCB implementation by six months due to Covid-19 pandemic
  • The implementation of the regulations was to happen by September 30, and the same has been now deferred to April 1, 2021

Concept:

  • The capital conservation buffer (CCB) is designed to ensure that banks build up capital buffers during normal times (i.e., outside periods of stress) which can be drawn down as losses are incurred during a stressed period.
  • As per Basel standards, the CCB was to be implemented in tranches of 0.625% and the transition to full CCB of 2.5% was set to be completed by 31 March 2019. It was subsequently decided to defer the implementation of the last tranche of 0.625% of the CCB from 31 March 2019 to 31 March 2020.
  • Considering the potential stress on account of COVID-19, it has been decided to further defer the implementation of the last tranche of 0.625% of the CCB from 31 March 2020 to 30 September 2020.
Capital conservation Buffer economy