Bank Capital Requirements: Basel Committee Proposes Changes to the G-SIB Capital Surcharge Assessment Framework

Sullivan & Cromwell LLP - April 6, 2017

On March 30, the Basel Committee on Banking Supervision published a consultative document proposing changes to the assessment framework used to identify global systemically important banks (“G-SIBs”) and to impose higher capital requirements on G-SIBs that are intended to reduce the probability of their failure.  The revised assessment framework would replace the framework issued in July 2013, which the Committee previously committed to review every three years to ensure that “the framework remains consistent with its objectives in light of any structural change to the global banking system or to banks’ business models.”  The proposal includes several concrete changes to the assessment framework (including changes to scope, definitions, weights, indicators and disclosure requirements), as well as an “issue for discussion”—the introduction of a new indicator for short-term wholesale funding—which the Committee believes “would benefit from broader input on the usefulness and potential implications if included in the assessment methodology.”

Although the proposal includes the Committee’s estimate of the potential quantitative impact of each proposed change based on year-end 2015 data, a comprehensive quantitative impact assessment to analyze the impact of the proposed changes will not be completed until after the end of the three-month consultation period.  Following this comprehensive quantitative impact assessment, the Committee will publish the revised version of the G-SIB framework.  The proposal’s transition schedule indicates that the Committee seeks to publish the revised version in November 2017.

Comments on the consultative document are due by June 30, 2017.