Pillar 1 of the Basel III framework enforces a static safety buffer known as the Capital Conservation Buffer (CCB) to prevent banks from depleting their capital reserves during periods of profitability.
The CCB Capital Restrictions Tier
The CCB requires all banks to hold an additional 2.5% of Common Equity Tier 1 (CET1) capital on top of the minimum 4.5% baseline requirement, bringing the effective operational CET1 target to 7.0%.
  Current CET1 Capital Tier |   CCB Cushion Position Tier   |   Maximum Permitted Dividend Distribution
----------------------------+-------------------------------+-----------------------------------------
  7.0% and Above            | Full buffer zone satisfied    | 100% of discretionary distributions allowed
  6.25% to 6.99%            | Upper buffer restriction zone | Capped at 60% of annual corporate earnings
  5.50% to 6.24%            | Mid buffer restriction zone   | Capped at 40% of annual corporate earnings
  4.75% to 5.49%            | Lower buffer restriction zone | Capped at 20% of annual corporate earnings
  Under 4.75%               | Buffer completely exhausted   | 0% distributions
PreviousNext