Appendix 6: Effective Countercyclical Buffer
C 52/2017 STA يسري تنفيذه من تاريخ 1/4/2021Assume a bank has the following capital ratios
| Capital Base | Minimum Capital Requirements | Bank's Capital Ratio |
| Common Equity Tier 1 Capital Ratio | 7.00% | 9.50% |
| Tier 1 Capital Ratio | 8.50% | 0.00% |
| Tier 2 Capital Ratio | 2.00% | 4.00% |
| Total Capital Ratio | 10.50% | 13.50% |
From the above table, the bank has fulfilled all minimum capital requirements. In addition, the bank has to meet the additional capital buffers:
| Capital Conservation Buffer (CCB) | 2.50% |
| Countercyclical Buffer | 0.00% |
| D- SIB | 1.00% |
| Aggregated Buffer requirement (effective CCB) | 3.50% |
The table below shows the adjusted quartiles accordingly:
| Freely available CET 1 Ratio | Minimum Capital Conservation Ratios (expressed as a percentage of earnings) |
| Within 1st quartile of buffer: 0.0 % - 0.875% | 100 % |
| Within 2nd quartile of buffer: > 0.875% - 1.75% | 80 % |
| Within 3rd quartile of buffer: > 1.75% - 2.625% | 60 % |
| Within 4th quartile of buffer: > 2.625% - 3.5% | 40 % |
| Above top of the buffer: > 3.5% | 0 % |
As the bank does not have Additional Tier 1, the bank has to use 8.5% of its available CET1 to fulfill the minimum Tier 1 requirement of 8.5%. Only the proportion of CET1 that is not allocated to fulfill the minimum capital requirements is freely available to fulfill the buffer requirement. For this bank, 1% CET1 is freely available, because the bank already used 8.5% of its CET1 to fulfill the Tier 1 ratio. (9.5% available CET1 - 8.5% CET1 required to fulfill the Tier 1 minimum requirement of 8.5%).
Impact: The bank breaches the effective CCB with 1% freely available CET1. Capital conservation is required by at least 80% of the bank’s earnings. Distributions to shareholders is limited to maximal 20% of the bank’s earnings (Central Bank approval of dividends still required).