An extra layer of common equity above the minimum that a bank must hold in good times. Falling into it limits dividends and bonuses.
Where you will meet it
Capital conservation buffer comes up in 2 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“It set minimum common equity Tier 1 of 4.5% of risk-weighted assets, Tier 1 of 6% and total capital of 8%, plus a 2.5% capital conservation buffer in common equity and a countercyclical buffer.”
Solvency, Liquidity, and Other Regulation After the Global Financial Crisis FRM Part II · Operational risk and resilience
“The capital conservation buffer is a fixed 2.5% of RWA.”
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