PBOC, CBIRC Enhance Policy Toolbox with CCyB Implementation

​The initial countercyclical capital buffer ratio will be set at zero, meaning capital requirements of banks have not been increased. 

The PBOC (People’s Bank of China) and CBIRC (China Banking and Insurance Regulatory Commission) have announced the launch of a CCyB (countercyclical capital buffer) mechanism.

The CCyB forms part of the Basel III regulatory capital framework, designed to increase the resilience of the banking sector in periods of excess credit growth, and to allow it to act as a ‘shock absorber’ in times of stress.

“Establishing a countercyclical capital buffer mechanism is an important measure to improve the macroprudential policy framework and enrich the macroprudential policy toolbox,” the PBOC and CBIRC said in a joint statement.

“It will help further promote the stable operation of banking financial institutions, enhance the countercyclical adjustment capabilities of macroprudential policies , and ease financial risks.”

The initial CCyB ratio will be set at zero, meaning capital requirements of banks have not been increased.

The PBOC and CBIRC said the CCyB ratio will be regularly assessed and adjusted to prevent systemic risk, considering factors such as the macroeconomic and financial situation, leverage levels, and the robustness of the banking system.

The CCyB mechanism was implemented on Wednesday (30 September).