Contra-Cyclical Capital Buffering Solutions for Banks

In the cusp of Basel III scenario in Banking, importance of capital adequacy measurements has reached centre stage. In the volatile world of global banking, building Capital buffers as a contra-cyclical measures in consonance with the risk assumed by the bank, to capture and evaluate the potential vulnerability to some unlikely but plausible events or movements in financial variables is being suggested as a remedy by global supervisors. The paper examines and explains the importance and relevance of Capital buffering solutions under Stress Scenarios. The Paper also examines, how this innovative Capital Assessment tool / model/ framework is generally formulated, tested by factoring various scenarios and battery of tests. It has very high practical relevance to the practicing bankers and professionals engaged in financing (incl. Risk managers). An evaluation of the context of the Basel II and III regime and how the methodologies are getting integrated into the Stress Testing framework of banks which is being adopted as an indispensable tool in the hands of Banking Regulators and Supervisors world across is also high-lighted.