Global systemically important banks: revised assessment methodology and the higher loss absorbency requirement

The Basel Committee on Banking Supervision published today the Global systemically important banks: revised assessment methodology and the higher loss absorbency requirement. The revised methodology is expected to be implemented in member jurisdictions by 2021. Building on member jurisdictions' experience and the feedback received during the public consultation concluded in June 2017, the Committee has reconfirmed the fundamental structure of the global systemically important bank (G-SIB) framework. There is general recognition that the framework is meeting its primary objective of requiring G-SIBs to hold higher capital buffers and providing incentives for such firms to reduce their systemic importance.

The decision to maintain the core elements of the G-SIB framework will further contribute to the stability of the regulatory environment after the recent finalisation of the Basel IIII post-crisis reforms.

The Committee 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 higher loss absorbency (HLA) surcharge when a G-SIB moves to a lower bucket; and
• Adopting a transitional schedule for the implementation of these enhancements to the G-SIB framework.

When the G-SIB framework was first published, the Committee agreed to review the framework every three years to allow for the opportunity to enhance the framework, as needed. The Committee also reconfirmed the importance of the three-year review cycle. In particular, the Committee will pay attention to alternative methodologies for the substitutability category, so as to allow the cap to be removed at that time.