The Purpose of the Countercyclical Buffer Proposed by Basel III

question 33

Multiple Choice

The purpose of the countercyclical buffer proposed by Basel III is to

• A)expose those banks with inadequate capital to survive economic downturns.
• B)assist insolvent banks build capital during economic expansions.
• C)protect the banking system and reduce systematic exposures to economic downturns.
• D)enhance global movement of funds to those countries experiencing excess aggregate credit growth.
• E)force DIs to immediately adjust capital to meet the 2.5 percent level of buffer capital required.

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Definitions:

Seasonal Variation

The fluctuations in data or activity that occur at specific regular intervals due to seasonal factors, such as quarterly or annually.

Steady Growth

A consistent and uninterrupted increase in size, value, quantity, or extent over a period of time.

Exponential Smoothing

A time series forecasting method for univariate data that applies weighted averages of past observations, giving more weight to recent observations.

Long-term Trend

The persistent movement or direction in data over a long period, revealing a general pattern of change.