17.The buffer for internationally active banks will be a weighted average of the buffers deployed across all the jurisdictions to which it has credit exposures. The buffer that will apply to each bank will reflect the geographic composition of its portfolio of credit exposures. When considering the jurisdiction to which a private sector credit exposure relates, banks should use, where possible, an ultimate risk basis; i.e. it should use the country where the guarantor of the exposure resides, not where the exposure has been booked.

18.Banks will have to look at the geographic location of their private sector credit exposures (including non-bank financial sector exposures) and calculate their countercyclical capital buffer requirement as a weighted average of the buffers that are being applied in jurisdictions to which they have an exposure. Credit exposures in this case include all private sector credit exposures that attract a credit risk capital charge or the risk weighted equivalent trading book capital charges for specific risk and securitisation.

19.The weighting applied to the buffer in place in each jurisdiction will be the bank’s total credit risk charge that relates to private sector credit exposures in that jurisdiction, divided by the bank’s total credit risk charge that relates to private sector credit exposures across all jurisdictions. Banks must determine whether the ultimate counterparty is a private sector exposure, as well as the location of the “ultimate risk”, to the extent possible.

20.The charge for the relevant portfolio should be allocated to the geographic regions of the constituents of the portfolio by calculating the proportion of the portfolio’s total credit exposure arising from credit exposure to counterparties in each geographic region.

Please refer to Question 15 of the FAQs below for further guidance and examples of countercyclical buffers.