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  • 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