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COREP Guidance COREP Terms & Definitions CONTACT US What is the Capital Conservation Buffer?

What is the Capital Conservation Buffer?

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COREP Reporting: Capital Conservation Buffer

The Capital Conservation Buffer is intended to ensure that firms build up buffers of capital outside any periods of stress and is designed to avoid breaches of minimum capital requirements. This capital buffer can then be drawn upon in times when losses are incurred.

Per Basel III requirements, a firm must calculate a capital conservation buffer of CET1 capital equal to 2.5% of its total risk exposure amount.

However, the capital conversion buffer rate will be transitioned in from 2016 and thus will only be 2.5% from 2019 onwards. During this transitional period, the Capital Conservation Buffer Rates will apply as follows:

Capital Conservation Buffer Rates:

2014        N/A

2015        N/A

2016        0.625%

2017        1.250%

2018        1.875%

2019        2.500%

What is the difference between the Capital Conservation Buffer and the Countercyclical Buffer?

The percentage and thus amount for the Capital Conservation Buffer is fixed, whilst the percentage that determines the amount of Countercyclical Buffer required is variable.

If you would like to discuss any aspect of your COREP reporting requirements, please do not hesitate to contact us.

The Capital Conservation Buffer is to be built up by firms outside any periods of stress to avoid breaches of minimum capital requirements

The new capital buffers - the Countercyclical Buffer and the Capital Conservation Buffer - took effect from 1st January 2016

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