Bank Capital Requirements: Federal Reserve Releases Final Policy Statement on the Framework for Setting the Countercyclical Capital Buffer

Sullivan & Cromwell LLP - September 14, 2016

The Federal Reserve recently released a final policy statement describing the framework it will follow in setting the amount of the countercyclical capital buffer (“CCyB”) under its capital rules for private-sector credit exposures located in the United States (the “final policy statement”).  The CCyB is a macroprudential policy tool that is intended to address risks to the broader financial system and to be used to increase the resilience of large banking organizations when the Federal Reserve sees an elevated risk of above-normal losses.  The CCyB supplements minimum capital requirements and other capital buffers and functions as an expansion of the capital conservation buffer.  The CCyB 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 any depository institution subsidiary of such banking organizations.