This study assesses the behaviour of credit extension over the economic cycle to determine its usefulness as a reference guide for implementing the countercyclical capital buffers for financial institutions in South Africa. The study finds that the common reference guide for implementing the countercyclical capital buffers, which is based on the gap between the ratio of aggregate private sector credit to gross domestic product and its long term trend, increases during the economic cycle busts, while such a relationship is broken during the economic cycle booms. The study also finds that this common reference guide decreases during the upturns in the economic cycle, while it increases during the periods of downturns in the economic cycle. Thus credit extension should be used with caution as a common reference guide to determine the level of the countercyclical capital buffers for financial institutions in South Africa.