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July 05, 2018

BCBS revised the assessment methodology for global systemically important banks (G-SIBs), along with the higher loss absorbency (HLA) requirement. BCBS reconfirmed the fundamental structure of the G-SIB framework on concluding the first review of the G-SIB framework; the revisions also built on the experience of member jurisdictions and the feedback received during the public consultation that was concluded in June 2017. The revised assessment methodology will take effect in 2021 (based on end-2020 data) while the resulting HLA requirement would be applied in January 2023.

There is general recognition that the framework is meeting the primary objective of requiring G-SIBs to hold higher capital buffers and is providing incentives for such firms to reduce their systemic importance. The decision to maintain the core elements of the G-SIB framework also contributes to the stability of the regulatory environment following the end-2017 finalization of the Basel III post-crisis reforms. Based o the, BCBS agreed to the following enhancements to the G-SIB framework:

  • Amending the definition of cross-jurisdictional indicators consistent with the definition of BIS consolidated statistics
  • Introducing a trading volume indicator and modifying the weights in the substitutability category
  • Extending the scope of consolidation to insurance subsidiaries
  • Revising the disclosure requirements
  • Providing further guidance on bucket migration and associated HLA surcharge when a G-SIB moves to a lower bucket
  • Adopting a transitional schedule for the implementation of these enhancements to the G-SIB framework

The revised assessment methodology will take effect in 2021 (based on end-2020 data) while resulting HLA requirement would be applied in January 2023. This will allow banks to maintain a certain degree of consistency with the 2013 G-SIB assessment methodology and to provide national authorities with the time to implement the changes in their respective regulatory frameworks, The operational timetable for the G-SIB regime until the next review of the methodology, which is due in 2021, has been set out in Annex 3.

 

Related Links

Effective Date: 2021 (assessment methodology), and January 2023 (HLA requirement)

Keywords: International, Banking, Basel III, Reporting, G-SIB, G-SIB Framework, HLA Requirement, BCBS

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