Thailand questions Basel III counter-cyclical buffer metric

Central bank says credit-to-GDP ratio fails to reflect economic cycle


The use of credit-to-GDP ratio as the primary indicator to instigate the counter-cyclical capital buffer (CCB) aspect of Basel III could give a misleading picture of the development of the economic cycle and doesn't take account of the measure's potential impact on monetary policy, according to the Bank of Thailand (BoT). The CCB was included in the Basel III rules as a means to slow down credit creation in the run-up to a potential financial crisis and gives regulators the power to require b