Answer: Its primary goal is to avoid destabilizing losses subsequent to a period of excess credit growth

## Explanation The correct answer is **C** because the countercyclical capital buffer is designed to be a **macroprudential tool** that builds up capital during periods of excessive credit growth so that banks have a buffer to absorb losses during economic downturns. Let's analyze each option: - **A**: Incorrect - The countercyclical buffer is primarily a **macro-prudential** measure, not micro-prudential. Micro-prudential measures focus on individual institutions, while macro-prudential measures address systemic risks across the financial system. - **B**: Incorrect - The countercyclical buffer can range from 0% to 2.5% and can be adjusted by national authorities based on credit conditions. It is not fixed at 2.5% and can be set to zero when credit conditions are normal. - **C**: **Correct** - The primary objective of the countercyclical buffer is to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risk. It aims to ensure that banking sector capital requirements take account of the macro-financial environment in which banks operate. - **D**: Incorrect - The countercyclical buffer applies to all internationally active banks, not just those in specific jurisdictions designated by the Basel Committee. National authorities determine the buffer rate for their jurisdiction, and banks must apply the higher of their home jurisdiction's rate or the rate in jurisdictions where they have significant credit exposures.

Author: LeetQuiz .