Amending Guidelines for the identification of global systemically important institutions.pdf

General Information

This document is an amended guide published by the European Banking Authority (EBA) in September 2022. It modifies the EBA/GL/2020/14 guidelines relating to the specification and disclosure of systemic importance indicators for the identification of globally systemically important institutions (G-SIIs) in the European Union. The scope covers identification methodologies, data disclosure requirements, and the integration of the specificities of the European Banking Union (EBU) and the Single Resolution Mechanism (SRM) into risk indicators, for the current and upcoming periods.

Executive Summary

The amended EBA guide specifies the modalities for identifying and disclosing globally systemically important institutions (G-SIIs) in the European Union, integrating the specificities of the European Banking Union (EBU) and the Single Resolution Mechanism (SRM). Initially, so-called "ancillary" or "memorandum" data were not disclosed, but this document clarifies that certain elements related to the recognition of the EBU, although included in these categories under the Basel framework, must now be considered essential and therefore disclosed. This modification responds to the recognition by the Basel Committee in 2022 of progress made in European integration, which led to the introduction of an additional overall score for European G-SIIs taking into account cross-border activities within the EBU. The increased disclosure of these data, already collected, improves transparency without increasing the institutions' burden. The guide does not modify the fundamental methodology but clarifies the interpretation of data to be disclosed, thus ensuring better harmonization and a level playing field. The public consultation was deemed disproportionate, the EBA expert group consultation having validated these amendments.

Context and Objectives

The EBA developed these amendments to integrate into the G-SIIs identification methodology the specificities of the European Banking Union and the Single Resolution Mechanism, in accordance with European regulatory developments (Directive (EU) 2019/878 and Delegated Regulation (EU) 2021/539). The issue lies in the need to recognize progress in European integration within the international framework of the Basel Committee, notably in the treatment of cross-border exposures. The objective is to ensure increased transparency and harmonization of disclosed data, particularly by clarifying that certain elements previously considered ancillary must be integrated into the calculation of G-SIIs scores. The scope covers European financial institutions subject to these rules, without increasing reporting obligations.

Summary of Key Points by Theme

G-SIIs Identification Methodology: The EBA follows the Basel Committee methodology to identify G-SIIs, with specific adaptations for the European Union. Since 2020, RTS, ITS, and guidelines govern this identification and the disclosure of indicators (p. 4).

Recognition of the European Banking Union (EBU): In 2019, Directive (EU) 2019/878 introduced an additional methodology to take into account the specificities of the EBU and the SRM in cross-border activity indicators. This approach was detailed in Delegated Regulation (EU) 2021/539 (p. 4-5).

Basel Committee Agreement: In May 2022, the Basel Committee recognized the progress of the EBU and agreed to adjust the G-SIB scores of European banks by calculating a parallel score considering a 66% reduction of intra-EBU exposures treated as domestic (p. 5).

Clarification of Data to Disclose: Data related to the recognition of the EBU, previously classified as "memorandum" under the Basel framework, are now considered core data for the identification of G-SIIs in Europe and must be disclosed. This clarification harmonizes the understanding of the term "ancillary or memorandum data" in the European context (p. 3, 5).

Impact on Transparency and Reporting Burden: These data are already collected and transmitted to the EBA, so their disclosure does not create additional burden. This strengthens the transparency of the identification process without increasing the institutions' load (p. 3, 5).

Consultation Process: The modification being limited and without major impact, the public consultation was deemed disproportionate. The EBA expert group was consulted and expressed no opposition (p. 3, 5).

Compliance Obligations and Timeline: Competent authorities must comply with these guidelines and notify their compliance to the EBA before 16 January 2023. These guidelines apply to the relevant authorities and financial institutions (p. 8-9).

Main Findings and Lessons Learned

Findings: The EBA collects and discloses the main indicators for G-SIIs identification, but not ancillary or memorandum data, except for data related to the EBU now considered core (p. 3, 5). The Basel Committee recognized in 2022 the specificity of the EBU and validated an adjusted parallel score for European G-SIBs (p. 5).

Assumptions: The amendment is based on the assumption that disclosing data related to the EBU improves transparency and consistency without increasing the reporting burden, as these data are already collected (p. 3, 5).

Interpretations: The EBA interprets that these data must be excluded from the "ancillary or memorandum" category to ensure correct classification of G-SIIs in Europe, in compliance with European regulatory requirements and the international agreement (p. 5).

Uncertainties: The document does not mention major uncertainties, but the effective implementation by national authorities and the consistency of disclosed data remain to be monitored.

Conclusions and Recommendations

The EBA concludes that amending the guidelines is necessary to integrate the official recognition of the European Banking Union into the G-SIIs identification methodology. It recommends that data related to the EBU, although previously classified as ancillary, be now considered core and disclosed to ensure transparency and fairness. The guide specifies that this modification does not create additional burden and must be implemented by competent authorities before 16 January 2023. No public consultation was deemed necessary, the expert group consultation having validated the approach. The EBA invites authorities to notify their compliance and to integrate these amendments into their supervisory practices.