CBIRC and PBC Consult on Measures to Evaluate and Identify D-SIBs
CBIRC and PBC are consulting on the evaluation measures for systemically important banks in China. The evaluation measures set out rules for the assessment and identification of systemically important banks and are intended to improve the regulatory framework for systemically important financial institutions in China. The measures apply to commercial banks, development banks, and policy banks established in accordance with the law. The data used in the evaluation are group consolidation data and the scope of the consolidation is determined in accordance with the supervision and consolidation scope of CBIRC. The comment period for this consultation expires on December 11, 2019. The key questions and answers (Q&A) regarding these evaluation measures have also been published.
These measures represent a significant step toward strengthening macro-prudential management and guarding against the “too-big-to-fail” risks challenging the systemically important banks in China. The measures also address critical institutional arrangements for the prevention and mitigation of major financial risks. The measures will help to identify banks exerting systemic influence on financial system in China, boost the transparency and feasibility of the recognition of systemically important banks in China, and contribute to the sound operation of these banks. The measures consist of four chapters and 20 articles. The measures are aimed to evaluate the systemic importance of participating banks, identify systemically important banks in China, publish a list of systemically important banks each year, and conduct differentiated supervision of systemically important banks based on the list to reduce the possibility of major risks and prevent systemic risk.
As a next step, CBIRC and PBC propose to send data submission templates and data reporting instructions to 30 eligible banks under review, collect data of 2018, and conduct 2019 evaluation of systemically important banks. Scores indicating the systemic importance of 30 banks will be calculated with quantitative assessment indicators. Tier-one assessment indicators include size, interconnectedness, substitutability, and complexity—each of which carries a weight of 25%. Every tier-one indicator comprises several tier-two indicators. Banks whose scores are above a certain threshold will be included in an initial list of systemically important banks. Next, by taking into consideration other quantitative and qualitative information, a supervisory judgment is proposed to be made on the systemic importance of the banks. CBIRC and PBC will then jointly release the final list of systemically important banks upon recognition of the Financial Stability and Development Committee (FSDC) under the State Council.
Related Links (in Chinese)
Comment Due Date: December 11, 2019
Keywords: Asia Pacific, China, Banking, Macro-Prudential Measures, Systemic Risk, Too Big to Fail, Q&A, Reporting, D-SIBs, PBC, CBIRC
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