The Industry appreciates the change in the Committee's overall regulatory approach. Replacing the previously conceived automatic Pillar 1 capital or liquidity surcharges with a tailored approach that relies on a bank's self-assessment in conjunction with supervisory analysis is an important step in the right direction.
Nevertheless, the Industry is concerned about introducing another regulatory framework that is forward looking in nature with an overly broad mandate. The proposed Guidelines could impose significant operational burdens on banks, be mostly redundant in the context of other regulatory frameworks, and ultimately be difficult to apply consistently, even among banks within the same jurisdiction. The Industry strongly recommends postponing finalization of this framework until the Committee's own assessment of the effectiveness of their post-crisis reforms has been conducted and evaluated. A postponement would also enable policy-makers to recognize the results of the European Commission's Call for Evidence, the outcome of the analysis currently conducted by the U.S. Department of the Treasury as mandated by President Trump's recent Executive Order, as well as the envisaged post-implementation evaluation of the effects of the G20 Financial Regulatory Reforms to be conducted by the Financial Stability Board (FSB).' If these analyses should confirm the need for an enhanced emphasis on step-in risk this should be addressed through revisions to the Committee's existing standards rather than the development of an incremental step-in risk framework.
Should the Committee nevertheless decide to proceed with the finalization of the step-in risk Guidelines the clarity and focus of the proposed Guidelines should be improved to reduce to some degree the scope of coverage and operational burden for banks in jurisdictions that have already implemented the Basel framework.