This document presents guidelines on the specification and disclosure of systemic importance indicators for financial institutions. It imposes compliance and reporting obligations on competent authorities and financial institutions within the European Union. The guidelines aim to ensure a consistent application of supervisory practices within the European System of Financial Supervision.
This document is a consolidated guide entitled "Guidelines on disclosure of G-SIIs indicators," published by the European Banking Authority (EBA) in 2023. It specifies the modalities for specifying and disclosing indicators of the global systemic importance of financial institutions (G-SIIs) within the European Union. The scope covers European financial groups and non-subsidiary institutions of a European group with an exposure leverage exceeding 200 billion euros, including insurance subsidiaries, with application from December 16, 2020. The guide is based on European regulations, notably Regulation (EU) No 1222/2014 and Directive 2013/36/EU, and incorporates international developments, notably the May 2022 Basel Committee agreement concerning the European Banking Union (p. 1-7).
This EBA guide aims to standardize the specification, collection, reporting, and annual disclosure of indicators used to identify globally systemically important financial institutions (G-SIIs) within the European Union. The importance of this document lies in the need to ensure transparency and comparability of data related to systemic risks, thereby contributing to European financial stability. The main findings are: the clear definition of indicators to be used, divided into themes such as size, interconnectedness, substitutability, complexity, and cross-border activity; the obligation for competent authorities and concerned entities to collect and publish these data according to a precise schedule (data as of December 31, publication no later than July 31 of the following year); the integration of specific data related to the Single Resolution Mechanism (SRM) to adjust cross-border indicators; and the use of a standardized electronic format with LEI identification. The conclusions emphasize the need for strict compliance by authorities and institutions, with transparent reporting aligned with international standards. Recommendations focus on the effective implementation of these guidelines, the annual publication of indicators on institutions' websites, and the complete transmission of data to the EBA for consolidation and dissemination (p. 1-7).
The guide was developed to meet the regulatory requirement to identify and monitor financial institutions whose failure could have a systemic impact on the European financial system. The issue is to ensure a harmonized and transparent methodology for collecting and disclosing systemic risk indicators, in order to improve supervision and risk management. The stakes include financial stability, crisis prevention, and protection of depositors and investors. The objective is to precisely specify the indicators to be used, the reporting and publication modalities, as well as the role of competent authorities. The scope is limited to entities exceeding an exposure threshold of 200 billion euros, with particular attention to cross-border activities within the Single Resolution Mechanism (SRM). The guide excludes institutions not meeting these criteria and specifies that authorities must notify their compliance to the EBA (p. 2-7).
Specification of indicators: The guide details an exhaustive list of indicators divided into several categories, notably size (total exposures, including derivatives, securities, and off-balance-sheet assets), interconnectedness (intra-financial assets and liabilities), substitutability (payment volumes, assets under custody, underwriting activities, and trading volumes), complexity (notional amounts of OTC derivatives, tradable assets, level 3 assets), and cross-border activity (cross-border claims and liabilities) (p. 8-14).
Reporting and disclosure: Concerned entities must annually provide data as of December 31, with public publication on their website no later than July 31 of the following year. Data must be transmitted via a standardized electronic format available on the EBA website, with identification by Legal Entity Identifier (LEI). Competent authorities ensure complete and consistent data collection, notably by aligning information with that transmitted to the Basel Committee (p. 5-7).
Role of authorities: Competent authorities must integrate these guidelines into their practices, notify their compliance to the EBA before February 16, 2021, and transmit collected data to the EBA for consolidated publication. They may also allow adjustments for entities whose fiscal year does not coincide with December 31, within the limit of July 31 for disclosure (p. 2-7).
Specific SRM methodology: Pursuant to Article 131(2a) of Directive 2013/36/EU and the May 2022 Basel agreement, an additional methodology excludes cross-border activities within the Single Resolution Mechanism, considering participating Member States as a single jurisdiction for calculating cross-border indicators (p. 5).
Technical annexes: The document includes a detailed annex listing indicators and data to be collected, with sections dedicated to different categories of indicators, as well as auxiliary elements and memorandums to improve data quality and prepare future methodological evolutions (p. 8-15).
Findings: The guide establishes a clear and detailed framework for the collection and disclosure of G-SIIs indicators, with precise requirements on data to be provided, formats, deadlines, and obligations of authorities and institutions. It incorporates European and international regulatory developments, notably the consideration of the SRM as a single jurisdiction.
Assumptions: The methodology is based on the assumption that exposure thresholds (200 billion euros) allow targeting significant systemic institutions. It also assumes that collected data are reliable and comparable thanks to detailed instructions and standardized formats.
Interpretations: The EBA interprets that transparency and standardization of indicators are essential for effective supervision and prevention of systemic risks. The integration of SRM data reflects a willingness to adapt the methodology to the reality of the Banking Union.
Uncertainties: The guide implicitly mentions limits related to data quality, availability of certain information, and possible evolution of indicators based on feedback and future regulatory developments (p. 2-15).
The EBA concludes that the rigorous implementation of these guidelines is crucial to ensure reliable and transparent identification of G-SIIs, contributing to European financial stability. It recommends that competent authorities integrate these requirements into their supervisory practices and ensure compliance of concerned entities. Institutions must annually publish indicators on their websites, respecting prescribed formats and deadlines. An implicit action plan includes notification of compliance to the EBA before February 16, 2021, annual data collection and transmission, public publication no later than July 31, and continuous adaptation of methodologies based on auxiliary data and memorandums (p. 2-7).
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