The countercyclical capital buffer (CCyB)

What is the UK’s countercyclical capital buffer?

Since the 2008 global financial crisis, we have made UK banks and building societies increase the financial resources (capital) they have set aside to act as a shock absorber for bad times.

The countercyclical capital buffer (CCyB) is one such tool which enables the Financial Policy Committee (FPC) to adjust the resilience of the UK banking system to the changing risks it faces over time.

The FPC sets the level of the UK CCyB rate. If the committee thinks risks are growing, it sets a higher UK CCyB rate.

This means that banks are required to have an additional cushion of capital to absorb potential losses, enhancing their resilience and contributing to a stable financial system.

Then, if those risks materialise, the FPC can let banks use this extra capital they have set aside, which helps them keep lending to households and businesses even in bad times.

The FPC’s approach to setting the countercyclical capital buffer is set out in its Policy Statement.

Foreign CCyB rate announcements (of relevance to UK)

As of March 2024, the Bank of England will no longer publish information on foreign CCyB rate announcements. This data is available on the Bank of International Settlement’s website.