The Financial Stability Board's (FSB's) list of global systemically important banks (G-SIBs)

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27 November 2023

The Financial Stability Board (FSB) today published the 2023 list of global systemically important banks (G-SIBs) using end-2022 data and applying the assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).

One bank (Bank of Communications (BoCom)) has been added to the list of G-SIBs that were identified in 2022, and two banks (Credit Suisse and UniCredit) have been removed. The overall number of G-SIBs therefore decreases from 30 to 29.

FSB member authorities apply the following requirements to G-SIBs:

• Higher capital buffer: The G-SIBs are allocated to buckets corresponding to higher capital buffers that they are required to hold by national authorities in accordance with international standards. Compared with the list published in 2022, three banks have moved to a higher bucket: Agricultural Bank of China, China Construction Bank and UBS have moved from bucket 1 to bucket 2.
• Total Loss-Absorbing Capacity (TLAC): G-SIBs are required to meet the TLAC standard, alongside the regulatory capital requirements set out in the Basel III framework.
• Resolvability: These requirements include group-wide resolution planning and regular resolvability assessments. The resolvability of each G-SIB is reviewed in the FSB Resolvability Assessment Process (RAP) by senior regulators within the firms’ Crisis Management Groups.
• Higher supervisory expectations: These include supervisory expectations for risk management functions, risk data aggregation capabilities, risk governance and internal controls.

The BCBS today published material related to the identification of G-SIBs, including including updated denominators used to calculate banks’ scores; the thresholds used to allocate the banks to buckets; and the values of the thirteen high-level indicators of all banks in the main sample used in the G-SIB scoring exercise. The BCBS also provides the links to the public disclosures of all banks in the full sample of banks assessed.

A new list of G-SIBs will next be published in November 2024.

FSB publishes 2023 G-SIB list

The 2023 list of global systemically important banks comprises 29 banks, one less than the 2022 list.

www.fsb.org

Credit Suisse removed because they were absorbed by UBS (which now requires a higher capital buffer).

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The Basel Committee on Banking Supervision today published further information related to its 2023 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.

The publication accompanies the Financial Stability Board's release of the updated list of G-SIBs and includes:

• The denominators of the high-level indicators used to calculate banks' scores.
• The high-level indicators for each bank in the sample used to calculate these denominators.
• The cut-off score used to identify the G-SIBs in the updated list and the thresholds used to allocate G-SIBs to buckets for the purpose of calculating the higher loss-absorbency requirements.

The Committee's methodology assesses the systemic importance of global banks using indicators calculated from data for the previous fiscal year-end (2022) supplied by banks and validated by national authorities. The final scores are mapped to corresponding buckets that determine the higher loss-absorbency requirement for each G-SIB.

Basel Committee publishes more details on global systemically important banks

Basel Committee provides additional information regarding the 2023 G-SIB assessment. Further details include global denominators and individual bank indicators. The release accompanies the Financial Stability Board's updated G-SIB list.

www.bis.org

 

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Bold emphasis is mine:

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The Basel Committee on Banking Supervision today published a progress report on banks' implementation of the BCBS 239 Principles for effective risk data aggregation and reporting. The report provides an update on the progress made by 31 G-SIBs (designated during 2011-21) in adopting the Principles.

Nearly a decade after the initial publication of the Principles and seven years after the expected date of compliance, banks are at different stages in terms of alignment. Additional work is required at all banks to attain or sustain full compliance. The global pandemic and recent stress events provided a stark reminder that banks' ability to manage risk-related data is essential for sound decision-making.

Consequently, the recommendations to banks that were identified in the previous reports still apply. In addition, boards should take full responsibility for overseeing the development, implementation, and maintenance of robust data governance frameworks. Furthermore, banks should foster a culture of ownership and accountability for data quality across the organisation, adopt the Principles comprehensively in a broader context and ensure sound data quality as the basis for digitalisation projects.

Similarly, the recommendations to supervisors that were highlighted in previous reports are still valid. In addition, supervisors should consider making greater use of the more intensive targeted activities, applying more forceful measures to address long-standing risk data aggregation and reporting deficiencies, and encouraging the application of the Principles in a broader context.

The Committee will continue to monitor G-SIBs' progress in adopting the Principles.

Basel Committee report on implementing Principles for effective risk data aggregation and reporting shows progress made but significant work still remains

Basel Committee issues progress report on banks' implementation of the BCBS 239 Principles for effective risk data aggregation and reporting. Nearly 10 years after the initial publication of BCBS 239, banks are at different stages in terms of aligning with the Principles. Additional work is...

www.bis.org

From the actual report:

... Of the 31 banks assessed, only two banks are fully compliant with all the Principles. Also, there is not a single Principle that has been fully implemented across all banks.

Although many banks have responded positively to the recommendations of the previous progress reports by establishing adoption programmes and roadmaps to achieve full compliance with the Principles, these programmes were often underfunded, limited in scope and lacking sufficient attention from boards of directors (boards) and senior management.2 Moreover, several banks failed to fully assess the complexity and interdependence of related projects, especially to address IT legacy systems and set ambitious timelines. Consequently, the recommendations to banks that were identified in the previous reports persist. ...

More (long):

https://www.bis.org/bcbs/publ/d559.pdf

 

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Global systemically important banks and window dressing

The Committee discussed a range of empirical studies that highlight "window-dressing" behaviour by some banks in the context of the framework for global systemically important banks (G-SIBs). Such regulatory arbitrage behaviour seeks to temporarily reduce banks' perceived risk profile around the reference dates used for the reporting and public disclosure of the G-SIB scores.

As noted previously by the Committee, window-dressing by banks is unacceptable. Such behaviour undermines the intended policy objectives of the Committee's standards and risks disrupting the operations of financial markets. To that end, the Committee agreed to consult in 2024 on potential policy options aimed at reducing window-dressing behaviour. To help inform this work, the Committee will collect higher frequency data items.
...

Basel Committee agrees to consult on targeted revisions to standards on cryptoasset and interest rate risk in the banking book and to take steps to address window-dressing in relation to the G-SIB framework

Basel Committee agrees to consult on targeted revisions to the standard on cryptoassets and a recalibration of the interest rate risk in the banking book standard. Decides to develop potential measures to address window-dressing behaviour by some banks in the context of the framework for global...

www.bis.org

lol... Liars gonna lie. Cheaters gonna cheat. Accounting is just the medium of their magic. It's who they are.

 

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Proposed alongside the risk weighting reforms known as the Basel III endgame this summer, the Federal Reserve's suggested updates to the global systemically important bank, or GSIB, surcharge aims to align banks' capital requirements more closely with their systemic profile.

The GSIB surcharge is an additional capital charge applied to the eight largest and/or most systemically important banks in the country — Bank of America, BNY Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo — on top of standard capital requirements.

Proponents of the proposed framework say it would be more adaptive to changing risk exposures within banks and prevent so-called "window dressing" — a practice in which banks clean up their balance sheets before year-end reporting deadlines — by requiring banks to disclose exposures based on daily averages, rather than a single moment in time.
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... the Institute of International Bankers and Bank Policy Institute, filed a comment letter with the Fed earlier this month. In it, they criticized the proposal to count derivatives between affiliated entities as cross-jurisdictional assets. Doing so, they argue, puts international banks at a disadvantage to their U.S.-based peers and violates standards established during the Fed's 2019 rulemaking on regulatoring tiering.
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Proponents of the rule change say the inclusion of derivatives in the cross-jurisdictional asset calculation was a needed change. In a joint comment letter, Stanford University professor Anat Admati along with University of Michigan assistant professors Jeremy Kress and Jeffrey Zhang, argued that derivatives function similarly to other included assets and can also transmit distress in the same way.

"Further, omitting derivatives from cross-jurisdictional indicators may incentivize banking organizations to transact with overseas counterparties using derivatives in a form of regulatory arbitrage," they wrote. "Conceptually, therefore, derivatives should be included in measures [of] cross-border activity, just like other cross-border claims and liabilities."
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Banks see mixed signals, reporting challenges in GSIB surcharge proposal

While less disputed than the Basel III endgame, the Federal Reserve's proposed framework for measuring and offsetting systemic risk within the nation's largest banks has sparked its own debate about what needs to be reported and the Fed's desired policy outcome for foreign subsidiaries.

www.americanbanker.com