EBA publishes criteria to assess other systemically important institutions (O-SIIs)

The European Banking Authority (EBA) issued today its final Guidelines defining the criteria that EU competent authorities will use to identify institutions that are systemically important either at Union or Member State level, the so-called ‘other systemically important institutions' (O-SIIs). These Guidelines aim at setting uniform parameters at EU level while taking into account specificities of Member States' individual banking sectors, so as to achieve an appropriate degree of convergence in the identification process as well as at ensuring a comparable, clear and transparent assessment of systemically important institutions in the EU.

These Guidelines establish common EU criteria for assessing systemically important institutions other than those identified as global systemically important institutions across the EU. The EBA aims to capture the appropriate balance between a European framework ensuring a level playing field and comparability across the Union, on the one hand, and the need to take into consideration specificities of Member States' individual banking sectors, on the other.

For this purpose, the Guidelines envisage a two-step process for the identification of O-SIIs. In the first step, on the basis of mandatory quantitative indicators (related to size, interconnectedness, relevance for the economy, complexity), competent authorities will obtain scores indicating the systemic importance of each bank. Banks scoring above a certain threshold (upper threshold) will have to be identified as O-SIIs, those scoring below a certain threshold (lower threshold) can never be identified as O-SIIs. 

In the second step of the process, competent authorities can still qualify banks scoring between the lower and upper thresholds as O-SIIs, by using their supervisory judgment, but only on the basis of a closed list of optional indicators set forth in the Guidelines. To ensure a high level of transparency and comparability, competent authorities are required to publicly disclose the reasons why they make use of their supervisory judgment.

Finally, to reduce the reporting burden for small institutions, competent authorities may decide to exclude very small institutions from the identification process, if they assess that they are unlikely to pose systemic threats to the domestic economy.

Legal basis and next steps

These Guidelines have been developed in accordance with Article 131(3) of Directive 2013/36/EU (CRD IV), which mandates the EBA to issue guidelines specifying the criteria for the identification of institutions as systemically important either at Member State or Union level (O-SIIs). In line with the provisions laid down in the CRD, competent authorities can require O-SIIs to hold an additional buffer of up to 2 percent of Common Equity Tier 1 (CET1).

The EBA will closely monitor the application of the Guidelines by national authorities and will periodically review the indicators according to the data received.