Under the Basel III regime, in order to counter cyclicality in the financial system, capital should be accumulated when cyclical systemic risk is judged to be increasing, creating a countercyclical capital buffer (CCB) that increases the resilience of the banking sector during periods of stress when losses materialise. This will help maintain the supply of credit and moderate the downswing of the financial cycle. The requirement to add to the CCB also dampens excessive credit growth during the upswing of the financial cycle.
