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The Basel Committee on Banking Supervision (‘BCBS’) is the primary global standard setter for the prudential regulation of banks and a forum for cooperation on banking supervisory matters. The BCBS’s mandate is to strengthen the regulation, supervision and practices of banks worldwide, with the purpose of enhancing financial stability. Its guidelines and standards include the international standards on capital adequacy.
The Basel III Accord (‘Basel III’) is a set of measures developed by the BCSB, in 2010-11, to strengthen the regulation, supervision and risk management of the banking sector, in response to the global financial crisis of 2008. Basel III aims to: improve the banking sector’s ability to absorb shocks arising from financial and economic stress; improve risk management and governance; strengthen banks’ transparency and disclosures. The Basel III reforms focus on: capital adequacy; stress testing and market liquidity risk; strengthening bank capital requirements by increasing bank liquidity and decreasing bank leverage.
The Financial Stability Board (‘FSB’) is an international body that was established in April 2009, as the successor to the Financial Stability Forum (‘FSF’), to monitor and make recommendations about the global financial system, with a broadened mandate to promote financial stability. The evolution of the FSF into the FSB followed the global financial crisis, with the G20 countries calling for a larger membership of the FSF to strengthen its ability / effectiveness to address vulnerabilities and to develop and implement strong regulatory, supervisory and other policies for financial stability
The FSB brings together policy makers from government, central banks, supervisory and regulatory authorities, for the G20 countries, plus Hong Kong, Singapore, Spain and Switzerland. In addition, it includes international bodies, including standard-setters and regional bodies such as the European Central Bank and European Commission. There are also six regional consultative groups (‘RCG’s), which reach out to authorities in 70 other countries and jurisdictions, including a wide range of emerging market and developing economies (‘EMDE’s). The FSB includes central banks, supervisors, securities regulators and ministries of finance as members. The FSB’s reach extends globally, incorporating all parties who set financial stability policies across the financial system.
As part of the regulatory response to the global financial crisis, and the ‘too big to fail’ risks and moral hazards that were identified in the crisis, in 2009 the FSB identified a list of Global Systemically Important Banks (‘G-SIB’s), for whom stricter regulatory capital adequacy requirements would apply. The G-SIB list of 30 banks was agreed in November 2011 and is updated in November each year. In addition, national lists of Domestic Systemically Important Banks (‘D-SIB’s) exist.
Basel III requires G-SIBs to operate with ‘Minimum Tier 1’ capital ratios. Further requirements relating to ‘Additional Tier 1’ and ‘Tier 2’ capital ratios, are also imposed on the G-SIBs. In the EU, European G-SIBs face even higher capital adequacy ratio requirements than those required by the FSB. Similarly, the EU is also applying some more stringent requirements than just the FSB requirements on D-SIBs. In addition to the Basel III capital adequacy requirements, in 2014 the FSB started a process to define requirements for Total Loss Absorbency Capacity (‘TLAC’), to be applied to G-SIBs.
You can access the annual FSB updates regarding the banks which are identified as G-SIBs, in addition to details of the ‘buckets’ (which determine the level of additional Tier 1 capital ratio required) which each bank sits in, via the following links:
|FSB G-SIB LISTS AND BUCKETS|
If you would like to discuss TICS, please call us on 020 7391 4551 or email firstname.lastname@example.org