GFMA with IIF and ISDA submitted a response to the Basel Committee on Banking Supervision’s (BCBS) consultation on the global systemically important bank (G-SIB) revised assessment framework (the “revised G-SIB assessment framework”).
The high-level response emphasized the importance of developing a revised G-SIB assessment framework based on the concept of a BCBS minimum standard, to support global compliance. It also highlights that it is crucial that jurisdictions finalize their approach to averaging after the BCBS policy process has concluded.
Key messages from the response include the following:
– While we note the focus of the BCBS consultation concerns perceived window-dressing behaviour, we do not believe that the proposal is founded on robust evidence of such behaviour.
– We also highlight that due to the relative nature of the G-SIB score calculation, the possibility of window-dressing G-SIB scores is remote, given the indicators used have a low correlation to the overall G-SIB score.
– We recommend that any changes to the current framework should be proportional to the anticipated supervisory benefits and should not result in unintended consequences such as reduced data assurance or data quality.
– We believe that the rationale for any proposed changes across the wider G-SIB indicator set should be driven by appropriate analysis in relation to the specific indicators concerned.
– Considering potential application, we think it is important to distinguish between the various G-SIB indicators.
– We agree with the BCBS that “it might be challenging or not meaningful for banks to provide high- frequency averaged data for certain indicators.”
– In relation to the specific averaging frequency options that the BCBS explores in the consultation paper, we strongly recommend that the BCBS avoids a daily or monthly average approach.
– Instead, we recommend that the BCBS consider the fact that the industry is already able to report the G-SIB indicators at each quarter-end (point-in-time value).
– Our understanding is that the analysis presented in BCBS Working Paper 42 was based on quarterly data.
– Regarding the scope of banks subject to the new requirements, it is clear that the choice between the three options presented in the BCBS consultation paper is closely linked to the potential application of higher frequency average requirements.
– On the proposed implementation timeline, we note that any changes to data averaging requirements would require operational changes, which may impact the industry’s ability to meet the proposed 1 January 2026 transition start-date and the proposed 1 January 2027 implementation deadline.
– 7 June 2024 –
