Saturday, 20 April 2024

Basel Committee consults on G-SIB framework window-dressing

5 min read

The Basel Committee on Banking Supervision issued a consultation on revisions to the global systemically important bank (G-SIB) assessment framework aimed at mitigating "window-dressing" behaviour by some banks in the context of the G-SIB framework.

Such regulatory arbitrage behaviour seeks to temporarily reduce banks' perceived systemic footprint around the reference dates used for the reporting and public disclosure of 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.

The proposed revisions aim at constraining banks' ability to lower their G-SIB scores through window-dressing. This will be achieved by requiring banks participating in the G-SIB assessment exercise to report and disclose most G-SIB indicators based on an average of values over the reporting year, rather than year-end values. An accompanying working paper sets out the analysis supporting the consultation.

The committee welcomes comments on all aspects of the consultation from stakeholders. Comments should be submitted here by 7 June 2024. All comments will be published on the website of the Bank for International Settlements unless a respondent specifically requests confidential treatment. Also published today is a working paper assessing the G-SIB score dynamics over the past decade.

Re-disseminated by The Asian Banker

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