On 5 July 2018, the Basel Committee on Banking Supervision (Basel Committee) published, Global systemically important banks: revised assessment methodology and the higher loss absorbency requirement.
The document updates and replaces the July 2013 Basel Committee publication Global systemically important banks: updated assessment methodology and the higher loss absorbency requirement (the 2013 publication). It sets out the revised measures developed by the Basel Committee on the assessment methodology for global systemic importance, the higher loss absorbency requirements for global- systemically important banks (G-SIBs), the transitional arrangements by which they will be implemented, and the data that banks above a certain size must publicly disclose. Similar to the 2013 publication, the framework is in accordance with the Financial Stability Board document Reducing the moral hazard posed by systemically important financial institutions – FSB Recommendations and Time Lines, which was endorsed by G20 leaders in November 2010.
The Basel Committee has made 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.
The Basel Committee expects members to implement the new methodology by 2021.