Nov 04, 2011
The rules text sets out the
Basel Committee's framework on the assessment methodology for global systemic
importance, the magnitude of additional loss absorbency that global systemically
important banks (G-SIBs) should have and the arrangements by which the
requirement will be phased in. The cover note
to the rules text sets out the Committee's summary and evaluation of the public
comments received on the July 2011 consultative document. The rules text was
finalised following a careful review of the public comments received. The work
of the Basel Committee forms part of a broader effort by the Financial Stability
Board to reduce the moral hazard of global systemically important institutions.
The rationale for the policy measures set out in the rules
text is to deal with the cross-border negative externalities created by G-SIBs
which current regulatory policies do not fully address. The measures will
enhance the going-concern loss absorbency of G-SIBs and reduce the probability
of their failure.
The assessment methodology for G-SIBs is based on an
indicator-based approach and comprises five broad categories: size,
interconnectedness, lack of readily available substitutes or financial
institution infrastructure, global (cross-jurisdictional) activity and
complexity.
The additional loss absorbency requirements will range from
1% to 2.5% Common Equity Tier 1 (CET1) depending on a bank's systemic importance
with an empty bucket of 3.5% CET1 as a means to discourage banks from becoming
even more systemically important.
The higher loss absorbency requirements will be introduced in
parallel with the Basel III capital conservation and countercyclical buffers, ie
between 1 January 2016 and year end 2018 becoming fully effective on 1 January
2019.
- Rules text (PDF, 32 pages, 185 kb)
- Cover note (PDF, 15 pages, 75 kb)
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