EBA consults on methodology for global systemically important institutions

The European Banking Authority (EBA) launched today a public consultation on the methodology for identifying Global Systemically Important Institutions (G-SIIs). The work aims at ensuring a transparent identification process in line with international regulatory work on global systemically important banks. The public consultation runs until 28 February 2014 and covers the draft RTS on the methodology for identifying G-SIIs, and draft ITS and Guidelines on the disclosure of the value of indicators used in the identification process.

The draft Regulatory Technical Standards (RTS) provide consistent parameters and specify a harmonised methodology for identifying G-SIIs and determining adequate levels of own funds across the European Union. The Capital Requirements Directive (CRD) requires that each year Member States' authorities calculate an individual score to measure a bank's systemic significance. Five categories of indicators to be used in this scoring process are defined in the CRD and the EBA draft RTS specify twelve further sub-indicators falling under these categories.

The draft Implementing Technical Standards (ITS) define uniform disclosure requirements to publicise the values used for the identification and scoring process for G-SIIs. These ensure fair competitive conditions between comparable groups of institutions, resulting in greater convergence of supervisory practices and more accurate risk assessments across the EU. Furthermore, uniform disclosure improves data quality and strengthens market discipline.

In order to ensure a transparent identification process and a level playing field, the proposed draft Guidelines foresee that not only G-SIIs, but also other large institutions with an overall exposure of more than EUR 200 billion Euro and which are potentially systemically relevant, will be subject to the same disclosure requirement.

Consultation process

Comments can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Please note that the deadline for the submission of comments is 28 February 2014.

All contributions received will be published following the close of the consultation, unless requested otherwise.

Background

In order to compensate for the higher risk that Global Systemically Important Institutions (G-SIIs) represent for the financial system and the impact that their potential failure may have on sovereign finance and taxpayers, the Capital Requirements Directive (CRD) foresees that higher own funds requirements should be imposed on G-SIIs.

The EBA developed these RTS on the basis of internationally agreed standards, such as the framework established by the Financial Stability Board (FSB), as well as standards for assessing Global Systemically Important Banks and for higher loss absorbency requirements developed by the Basel Committee on Banking Supervision (BCBS). What is more, in order to reduce the administrative burden for institutions, the identification of G-SIIs in the EU is synchronised with the BCBS process. This allows institutions to report the same data to both the BCBS and national authorities at Member States level.