NBB has renewed the other systemically important institution (O-SII) designation of eight Belgian banks that were designated as O-SIIs in 2019. For each O-SII, NBB has decided to maintain the capital surcharges announced in 2015. The levels of the capital surcharges are as follows: 1.5% for BNP Paribas Fortis, KBC Group, Belfius Bank, and ING Belgium; 0.75% for Euroclear, The Bank of New York Mellon, Argenta, and Axa Bank Belgium.
These designations are the result of the annual assessment by NBB, based on the EBA identification methodology for systemically important banks. The EBA methodology involves calculation of a score for each bank based on quantitative indicators of size, complexity, interconnectedness, and substitutability. Given that systemically important banks are defined as institutions whose failure would have a significant impact on the financial system or the real economy, additional capital requirements for such institutions have two principal motivations of
- Reducing the probability of default of the institution, given the high economic and social costs of such a default
- Imposing surcharges on the institution that reflect the negative externalities that its failure would generate
Related Link: Press Release
Keywords: Europe, EU, Belgium, Banking, Systemic Risk, O-SII, Regulatory Capital, Basel, NBB
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