The Purpose of the Countercyclical Buffer Proposed by Basel III

question 70

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 DTIs to immediately adjust capital to meet the 2.5 percent level of buffer capital required.

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Definitions:

Operating Lease

A lease agreement that allows for the use of an asset but does not convey rights of ownership to the lessee.

GAAP

GAAP (Generally Accepted Accounting Principles) is a collection of commonly-followed accounting rules and standards for financial reporting.

Capital Lease

A lease agreement in which the lessee gains ownership or a substantial portion of the rights to the asset by the end of the lease term, treated as a purchase in accounting.

Lessee

A person or entity that leases property or equipment from another, known as the lessor, under a lease agreement.