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Systemic entities of the banking sector

Since 2009, the identification of systemically important entities and the implementation of specific supervisory measures applicable to them is on the priority list of global, European and national financial supervisory authorities.

Outline

 

Definition and identification of systemic entities

The issue of systemic institutions was put on the agenda of financial supervisory authorities by the G20 during the Pittsburgh Summit, in September 2009, recommending the implementation of specific standards proportionate to the cost of a potential default, with the view of providing a framework for the activity of the most important international financial institutions. The declared aim is to put an end to the moral hazard situation linked to the existence of “too-big-to-fail” or “too-interconnected-to-fail” institutions given the risks they pose to the financial sector and the real economy. Actually, such institutions could hope for a public support in case of difficulties and, thus, be tempted to take more risks.

From 2009, these institutions called Systemically Important Financial Institutions (SIFIs) have been defined as financial institutions whose “distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity”. This identification is performed at the level of different perimeters where it makes sense, i.e. domestic, regional or global. At the global level, the identification of systemic entities (banking and insurance institutions) has been entrusted to the Financial Stability Board. At the European level, the international methodologies for identifying global or domestic systemically important banks have been transposed into European law through the CRD IV directive (Article 131) providing that “Member States shall designate the authority in charge of identifying, on a consolidated basis, global systemically important institutions”. In France, the authority is the ACPR (see next section).

The identification of systemic institutions allows, in a transparent way, to apply them specific supervisory measures aiming at both reducing the risks posed by these institutions and limiting the moral hazard that results from the implicit public guarantee they receive. Thus, institutions identified as systemic are subject to reinforced supervisory measures, for instance additional capital requirements, starting to enter into force from 2016 for the banking sector and that will be fully effective from 2019.

 

ACPR’s role and coordination with other authorities

At the French level, the Autorité de contrôle prudentiel et de resolution is in charge of the identification of systemically important entities. Thus, it determines for the banking sector the list of global systemically important institutions (G-SII) and that of other systemically important institutions (O-SII), as well as the capital buffers associated. For G-SIIs, the ACPR actively participates in the international identification exercise coordinated by the Basel Committee; the identification by the Financial Stability Board (FSB) is legally binding neither in French nor in European law, the list of G-SIBs (cf. next section) published every year by the FSB needs to be published by the ACPR. For O-SIIs, the principles of Basel methodology used in the CRDIV Directive have been specified by guidelines of the European Banking Authority (EBA).

The ACPR also participates in the drafting of the list of global systemically important insurers (G-SIIs).

 

Publications

Analyses et Synthèses n°39 sur " L'identification des groupes bancaires et d'assurance d'importance systémique mondiale 

Economic and Financial Debate n°33 on "The Impact of the Identification of GSIBs on their Business Model".

 

Systemic entities of the banking sector

The following table gathers the main information concerning the identification of G-SIIs (global perimeter) and O-SIIs (domestic perimeter).

French terminology

EISm

(Entités d’importance systémique mondiale)

A-EIS

(Autres entités d’importance systémique)

International terminolgy

Basel Committee on Banking Supervision (BCBS)

G-SIBs

(Global Systemically Important Banks)

D-SIBs

(Domestic Systemically Important Banks)

European terminology

European Banking Authority (EBA)

G-SIIs

(Global Systemically Important Institutions)

O-SIIs

(Other Systemically Important Institutions)

Methodologies

BCBS website on the international methodology

EBA Guidelines EBA/GL/2014/10

ACPR methodological note

Coordinating entity

At the international level, the Basel Committee on Banking Supervision (BCBS) is in charge of coordinating the identification of G-SIBs.

At the European level, the European Banking Authority (EBA) is in charge of coordinating the identification of O-SIIs.

Reporting

Link to the reporting template : http://www.bis.org/bcbs/gsib/

Data in sections 1 to 13 must be sent to : donnees-banques@acpr.banque-france.fr no later than 30 March every year.

The ACPR uses data already transmitted by the institutions in the framework of regulatory reporting.

Official lists of entities and capital buffers associated – in France

Link to the lists of G-SIIs for years 2012, 2013, 2014, 2015 and 2016.

Link to the 2015 list of O-SIIs (for years 2014, 2015 and 2016).

Lists of international or European entities

Link to lists of G-SIBs published by the FSB for the years 2011, 2012, 2013, 2014, 2015 and 2016

Link to the list of O-SIIs notified to the EBA in 2015 and 2016

Rules for setting capital buffers

In accordance with Article 32 of the Order of 3 November 2014 on capital buffers of banking service providers and investment firms other than asset management companies (see link below), the consolidated surcharge applying to a group is limited: it cannot exceed the strongest surcharge between that imposed for G-SIIs (up to 3.5% maximum) and that imposed for O-SIIs (up to 2% maximum).

Legal texts

G-SIIs : Financial and Monetary Code – Article L. 511 41-1 A VI

O-SIIs Financial and Monetary Code – Article L. 511 41-1 A VII

Order of 3 November 2014 on capital buffers

Order of 11 September 2015 modifying the Order of 3 November 2014 on capital buffers

Instruction 2016-I-21 of the ACPR

External links

EBA web page on G-SIIs of the European Union

 

FSB web page on SIFIs

 

Notifications on domestic G-SIIs listed by the ESRB

EBA web page on O-SIIs of the European Union

 

Notifications on domestic O-SIIs listed by the ESRB

 

 

Updated on: 07/16/2018 14:36