Moving forward with its efforts to implement the Basel III Accord, the Federal Reserve has finalized the U.S. version of the counter-cyclical capital buffer (CCyB). Although global regulators agreed in 2010 to a CCyB and several nations have since actually mandated one to address asset-price spikes, the U.S. takes a different approach. In it, the FRB has retained considerable discretion as to when, how, and why it would institute a CCyB requirement, although the final policy statement now makes it clearer than the proposal that the Board will not use asset- or sector-specific charges and will generally seek comment (possibly after the fact) on any CCyBs it decides to mandate. The Board has also made more clear its intention of lifting CCyBs when conditions warrant rather than using them as surcharges for larger BHCs over an extended period of time. However, the near-term prospect is only for CCyB imposition given current market conditions and the lack of any current buffer. The FRB plans to impose any CCyB gradually, but it has also retained discretion to go up to the full 2.5 percent buffer at once should it determine this to be necessary.
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