IIF Authors

Status: Will be live at 06/07/2024 14:52

IIF Responds to Basel Committee G-SIB window-dressing consultation

The Institute of International Finance (IIF), together with GFMA and ISDA, has submitted a response to the Basel Committee on Banking Supervision (BCBS) consultation on the global systemically important bank (G-SIB) revised assessment framework to help assist the Committee in refining its approach to the G-SIB assessment framework.

In the response we emphasize the importance of developing a revised G-SIB assessment framework based on the concept of a BCBS minimum standard, to support global compliance. Additionally, it is crucial that jurisdictions finalize their approach to averaging after the BCBS policy process has concluded. 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. Our feedback is therefore intended to help achieve higher-quality data over the financial year, to support the G-SIB assessment framework, rather than focusing on purported window-dressing behaviour. In relation to concerns over perceived window-dressing behaviour, we believe that further study is needed to effectively identify any such perceived behavior as well as the factors involved in, the true extent of, and the rationale underlying such practices. 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

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. Finally, 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.