Write short notes on the following: Capital Conservation Buffer.

Capital Conservation Buffer: A key feature of Basel III is that banks will be required to hold a capital conservation buffer of 2.5% of Risk Weighted Assets (RWAs) in the form of Common Equity to withstand future periods of stress bringing the total Common Equity requirement of 7% of RWAs and total capital to RWAs to 10.5%. The aim of asking to build conservation buffer is to ensure that banks maintain a cushion of capital that can be used to absorb losses during periods of financial and economic stress.