This paper investigates the relationship between the business cycle and the buffer capital based on 26 Taiwan banks over 2000-2009. The Panel data are estimated by Generalized Methods of Moments (GMM).The empirical evidence indicates that after introducing Basel II, buffer capital is negatively related to business cycle, which is similar to the situation before Basel II. But the pro-cyclical result is mitigated somewhat by bank’s provision from the income-smoothing behavior. This study also shows that the adjustment cost is significantly higher than before. There is no evidence that the risk attitude of bank has improved, however, it does show that the buffer capital for bank of FHCs are more pro-cyclical than those of non-FHCs.