Capital Conservation Buffer

The Capital Conservation Buffer is a regulatory mechanism for banks that requires them to maintain a reserve of extra capital during good economic times. This buffer is designed to help banks absorb losses during difficult periods without becoming insolvent. Essentially, it acts as a financial cushion, ensuring that banks are more resilient and can continue to lend and support the economy, even in downturns. By encouraging banks to save capital when profits are high, the buffer aims to promote long-term stability in the financial system.