Capital conservation buffer

How it is used

Use in prudential capital discussions; applicable distribution restrictions depend on the framework.

Example sentences

1. Losses reduced the bank's capital conservation buffer.

   The extra capital layer absorbs deterioration before minimum capital is exhausted.

2. The capital plan showed how the capital conservation buffer would be rebuilt.

   Rebuilding restores the layer available for future stress.

Common collocations

• maintain a capital conservation buffer
• rebuild the capital conservation buffer

Related terms

• capital adequacy ratioA bank's capital divided by its risk-weighted assets. It shows whether the bank has enough capital to absorb losses; Basel rules require at least 8% before extra buffers.
• Basel IIIA set of international banking rules agreed by the Basel Committee after the 2008 global financial crisis. It requires more and better capital and adds liquidity and leverage limits.

More terms: Regulation & Compliance

• compliance
• KYC
• money laundering
• fraud
• AML
• regulator
• suspicious transaction report
• sanctions
• terrorist financing
• PEP
• beneficial owner
• banking secrecy