Defining Global Systemically Important Banks and Additional Loss Absorbency Requirements


On 19 July 2011, the Basel Committee on Banking Supervision (“BCBS”) and the Financial Stability Board (“FSB”) published two papers relating to entities regarded as globally systemic important financial institutions (“G-SIFIs”). The first paper prepared by the BCBS which we consider in more detail below sets out proposals for an assessment methodology for determining whether a banking institution should be regarded as a globally systemically important bank (“G-SIB”) and the additional capital requirements that G-SIBs should be subject to. The second paper prepared by the FSB, which we will discuss in a separate alert, sets out proposals for a framework for the resolution of failing institutions.

In finalising its new Basel III framework at the end of 2010, the BCBS mandated all banks to hold significantly more capital than is currently the case as well as introducing new leverage and liquidity ratios. The changes included increasing the minimum amount of common equity (principally ordinary shares and retained earnings) to be held by banks from 2% to 4.5% of risk weighted assets during a transitional period between 1 January 2013 and 1 January 2015, with total tier 1 capital rising from 4% of risk weighted assets to 6% during the same period. Banks will also be required to build up a capital conservation buffer to be comprised of common equity of up to 2.5% of risk weighted assets and may also be subject to additional counter cyclical buffers that can be imposed by local regulators.

Please see full bulletin below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.