Financial Awareness - Risk, Stability & Emerging Finance
Which Basel Accord mandated the introduction of the Capital Conservation Buffer to ensure banks build up capital outside periods of stress?
Which Basel Accord mandated the introduction of the Capital Conservation Buffer to ensure banks build up capital outside periods of stress?
hard Q9 of 15
Step-by-Step Solution
Step 1: Recall buffer introductions
Basel I focused on minimum capital; Basel II introduced three pillars; Basel III introduced new capital buffers.Step 2: Identify Capital Conservation Buffer
Basel III mandated the Capital Conservation Buffer to ensure banks maintain capital buffers during good times to absorb losses during stress.Step 3: Eliminate other options
Basel IV is not officially released; Basel I and II did not have this buffer.Final Answer:
Basel III → Option DQuick Check:
Capital Conservation Buffer introduced = Basel III ✅
Quick Trick: Capital Conservation Buffer = Basel III capital buffer.
Common Mistakes:
- Confusing it with Countercyclical Buffer or Basel II pillars.
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