Large Bank Examination Workshop February 2026

How Does a CCyB Work? • During a recession, bank assets (e.g., loans) are likely to lose value. Banks need more capital during downturns since they sustain capital losses during recessions that decrease their capital-to-asset ratios. • In order to restore these ratios, banks may lend less, leading to more severe recessions and even larger capital losses. • The extra capital buffer can help ensure that banks have sufficient capital—a bigger cushion—to absorb those losses. This is a proactive attempt to protect against insolvency and possible future downturns.

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Basel III Endgame

• Published July 2023 - a regulatory proposed rulemaking to increase the strength and resilience of the banking system. • The proposal would modify large bank capital requirements to better reflect underlying risks and increase the consistency of how banks measure their risks. • The changes would implement the final components of the Basel III agreement, also known as the Basel III Endgame.

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