The G-SIB assessment methodology - score calculation.
In conjunction with today's publication by the Financial Stability Board (FSB) of the updated list of global systemically important banks (G-SIBs), the Basel Committee on Banking Supervision has released supporting information.
This information includes a technical summary which further explains the methodology and the denominators used to calculate the scores for banks in the end-2013 exercise and the cut-off score that was used to identify the updated list of G-SIBs. Also provided are the thresholds used to allocate G-SIBs to buckets for the purposes of calculating the specific higher loss absorbency (HLA) requirements for each institution, as well as links to the disclosures of the G-SIBs designated in 2014.
As detailed in the Committee's July 2013 publication, the methodology for assessing the systemic importance of banks consists of an indicator-based measurement approach. The indicators are calculated based on data for the previous fiscal year-end supplied by banks and validated by national authorities. These indicators and the denominators are then used to calculate a score.
After the automated calculation is produced, bank scores may in exceptional cases be adjusted by supervisory judgment. Consistent with the Basel framework, supervisors may use a variety of supporting evidence to propose such adjustments, including the use of additional data and qualitative information. These changes are subject to scrutiny by the Basel Committee and the FSB.
The final score, including the use of judgment, is then mapped to the corresponding bucket using the cut-off score and bucket thresholds. The assignment to a bucket determines the HLA requirement for each G-SIB.
The agreed methodology also requires banks to disclose, at a minimum, the 12 indicators used. However, given the potential for the use of supervisory judgment to adjust scores, the data disclosed by banks may not always be perfectly consistent with the final bucketing published today.
The HLA requirements will be phased in from 1 January 2016, based on the end-2013 results published today, with the full amount of the requirement in effect by 1 January 2019, consistent with the implementation schedule for the capital conservation buffer. By 1 January 2016, therefore, banks will only need to meet 25% of the HLA requirement published today. An illustrative example of the calculation methodology can be found in the technical summary published today.
- Publication Date: November 2014
- Publication Type: Standards
- Publication Status: Consolidated
- Publication Category: Macroprudential
- Number of Pages: 6
- Keywords: GSIB, Basel III
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