Under which one of the following the Basel framework places restrictions on participation by banks in system-wide credit booms with the aim of reducing their losses in credit bust?

The correct answer is Countercyclical Capital Buffer

Key PointsCountercyclical Capital Buffer is intended to guarantee that capital requirements for the banking sector consider the macroeconomic environment in which banks operate.

Additional InformationA capital buffer is an additional capital that financial organizations must retain over and beyond their basic capital requirements. And it has two categories, Countercyclical Capital Buffer, and capital conservation buffer.

When banks incur losses, the capital conservation buffer guarantees that they have an additional layer of useful capital from which to draw.