Back Custom print Link Text Only Rich Text Print

  • CA-2A.2 CA-2A.2 The Capital Conservation Buffer (CCB) Requirement

    • CA-2A.2.1

      Conventional bank licensees are required to hold a Capital Conservation Buffer (CCB) of 2.5%, comprised of CET1 above the regulatory minimum Total Capital ratio of 10%.8 Capital distribution constraints will be imposed on a conventional bank licensee when the CCB falls below 2.5%. The constraints imposed only relate to distributions, not the operation of the conventional bank licensee.

      8 Common Equity Tier 1 must first be used to meet the minimum capital requirements (including the 8% Tier 1 and 10% Total Capital requirements if necessary), before the remainder can contribute to the capital conservation buffer.

      January 2015

    • CA-2A.2.2

      Conventional bank licensees must note that they are required to maintain a minimum consolidated Total Capital Ratio of 12.5% and a solo Total Capital Ratio of 8% regardless of whether they do or do not have AT1 or T2 Capital and therefore conventional bank licensees will be required to retain 100% of the annual net profit unless their consolidated Total Capital Ratio is above 12.5% and their solo Total capital Ratio is above 8%.

      January 2015

    • CA-2A.2.3

      Elements subject to the restriction on distributions: Items considered to be distributions include dividends and share buybacks, discretionary profit distributions on other T1 capital instruments and discretionary bonus payments to staff. Payments that do not result in a depletion of CET1, which may for example include certain scrip dividends, are not considered distributions.

      January 2015

    • Capital Conservation Plan

      • CA-2A.2.4

        Where a conventional bank licensee fails to meet the required level of capital conservation buffer, it must prepare a Capital Conservation Plan (hereinafter referred to as "Plan") clearly outlining the information mentioned in this Paragraph. The conventional bank licensee must submit this Plan to the CBB within one week of becoming aware of the shortfall (see also CA-1.2.2). The conventional bank licensee must already have prepared such a Plan on a contingency basis. The Plan must include the following:

        (a) Estimates of income and expenditure and a forecasted balance sheet;
        (b) Measures to be taken to increase the conventional bank licensee's capital ratios;
        (c) A plan and time frame for the increase of capital with the objective of meeting fully the buffer requirement; and
        (d) Any other information the CBB deems necessary to carry out the assessment required, as indicated in Paragraph CA-2A.2.5.
        January 2015

      • CA-2A.2.5

        The CBB shall review the Plan submitted by the conventional bank licensee and shall approve it provided it considers that the Plan provides a reasonable basis for conserving or raising sufficient capital that will enable the conventional bank licensee to meet the buffer requirements within a period acceptable to the CBB. While reviewing the Plan, the CBB will also evaluate whether the conventional bank licensee has deliberately reduced its CET1 so as to operate in the buffer range (i.e. below the capital conservation buffer requirement) in order to reduce its cost of capital for competitive purposes.

        January 2015

      • CA-2A.2.6

        If the Plan is not approved by the CBB, it may take one or more of the following steps, inter alia, as deemed necessary:

        (a) Ask the conventional bank licensee to revise the Plan and resubmit it within a specified time period;
        (b) Require the conventional bank licensee to raise new capital from private sources to specified levels within specified periods; or
        (c) Impose more stringent restrictions on distributions than those required by Paragraph CA-2A.2.3
        January 2015