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    EC Revises Standards on Methodology for G-SII Identification

    March 29, 2021

    EC published, in the Official Journal of the European Union, the final Commission Delegated Regulation 2021/539 on regulatory technical standards for specification of the methodology for the identification of global systemically important institutions (G-SIIs) and for the definition of subcategories of G-SIIs. Regulation 2021/539 amends the Delegated Regulation 1222/2014 supplementing the Capital Requirements Directive (CRD IV or 2013/36/EU). Regulation 2021/53 shall enter into force on the day following that of its publication in the Official Journal, with certain provisions applying from December 01, 2021.

    The revisions to these regulatory technical standards are a result of the revised framework that BCBS introduced in July 2018 to identify global systemically important banks and of the new requirements laid down in the fifth Capital Requirements Directive (CRD5 or 2019/878). The data collection established in accordance with the revised methodology, which includes the trading volume indicator, will start in the first quarter of 2022. G-SIIs will, therefore, be identified on the basis of the revised framework for the first time in the last quarter of 2022. To align the application of the provisions of the revised methodology with the dates of application of the revised methodology, the provisions of Regulation 2021/539 that reflect the changes in the revised methodology should apply from December 01, 2021.

    Additionally, Article 131 of CRD IV was amended by CRD5 to introduce to CRD IV an additional overall score for G-SIIs with the cross-border activities’ indicator excluding the cross-border activities across the member states participating in the Single Resolution Mechanism (SRM). That additional overall score was introduced to reflect the ability to resolve cross-border groups within the European Banking Union in an orderly manner. Thus, it is appropriate to amend the scope of the cross-border activity indicator to reflect that change. Consequently, Regulation 2021/539 is amending Regulation 1222/2014 to make this change.

    In Regulation 2021/539, Article 4 on "Identification Procedure" states that the relevant authority shall calculate the scores of the relevant entities that are included in the sample notified by EBA and which are authorized in its jurisdiction not later than September 01 of each year. Where the relevant authority, in the exercise of sound supervisory judgment, reallocates a G-SII from a lower subcategory to a higher subcategory or designates a relevant entity as a G-SII in accordance with points (a) or (b) of Article 131(10) of CRD IV, respectively, the relevant authority shall provide EBA with a detailed statement in written form on the reasons for its assessment not later than November 01 of each year. Where the relevant authority, in the exercise of sound supervisory judgment, reallocates a G-SII from a higher subcategory to a lower subcategory in accordance with point (c) of Article 131(10) of CRD IV, the relevant authority shall provide EBA with a detailed statement in written form on the reasons for its assessment not later than September 30 of each year.

     

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    Effective Date: March 30, 2021

    Keywords: Europe, EU, Banking, CRR, Basel, CRD, Regulation 2021/539, G-SII, Regulatory Capital, EC

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