Publication - Assessment of Basel III G-SIB framework and review of D-SIB frameworks – European Union June 2016
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Executive summary
The Basel Committee on Banking Supervision (Basel Committee) sets a high priority on the implementation of regulatory standards underpinning the Basel III framework. The Committee established the Regulatory Consistency Assessment Programme (RCAP) to monitor, assess and evaluate its members’ implementation of the Basel framework.
This report summarises the findings of the RCAP Assessment Team on the domestic adoption of the Basel global systemically important bank (G-SIB) framework in the European Union (EU). The focus of the assessment was on the consistency and completeness of the regulations in the EU with the Basel Committee’s minimum requirements. An evaluation of the overall soundness and stability of the banking sector in the EU, the capital levels of individual banks and the supervisory effectiveness of the EU authorities was not in the scope of this assessment. The report also presents a review of the EU implementation of the Committee’s domestic systemically important bank (D-SIB) framework. Unlike the G-SIB assessment, this review was not graded, consistent with the high-level, principles-based nature of the Committee’s D-SIB framework.
The RCAP Assessment Team was led by Mr Wayne Byres, Chairman of the Australian Prudential Regulation Authority. The Assessment Team comprised four experts drawn from the Basel Committee Secretariat, Brazil, India and Singapore. The main counterpart for the assessment in the EU was the European Banking Authority (EBA), which also collected information from the relevant supervisory authorities in the countries that are home to G-SIBs. The assessment and review of the EU SIB frameworks was conducted alongside assessments and reviews in the other four jurisdictions that are currently home to G-SIBs: China, Japan, Switzerland and the United States.1
The EU G-SIB framework was issued in June 2013 through the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD), and came into force on 1 January 2014. These laws have been supplemented by binding technical standards and Guidelines issued by the EBA during 2014. There are currently 13 G-SIBs based in the EU: four in France, one in Germany, one in Italy, one in the Netherlands, one in Spain, one in Sweden and four in the United Kingdom (UK). The G-SIB framework in the EU is assessed as compliant with the Basel G-SIB framework. This is the highest overall grade. Both subcomponents of the G-SIB framework, higher loss absorbency and disclosure requirements, are assessed as compliant.
The Assessment Team’s review of the EU D-SIB framework found it to be broadly aligned with the Basel Committee’s D-SIB principles. The EU framework was finalised in June 2013 and took effect on 1 January 2016. It identifies “other systemically important institutions” (O-SIIs) using a methodology similar to the G-SIB assessment framework, employing certain country- or region-specific factors, and assigns a corresponding higher loss absorbency requirement of up to 2%. The EBA provides guidance on methodologies to be used by national authorities within the EU, including in the nine countries that are Basel Committee member jurisdictions. The RCAP Assessment Team acknowledges the professional cooperation received from the EBA and the relevant national authorities during the assessment and review.
The Assessment Team is hopeful that the RCAP exercise will contribute to the sound initiatives that have been undertaken in the EU and to strengthening further the prudential effectiveness and full implementation of these G-SIB and D-SIB frameworks.
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