Is there a special regime for domestic and/or globally systemically important banks?

Banking & Finance

Israel Small Flag Israel

There is no special regulatory regime for domestic systemically important banks, although certain banking regulation are applied differently on large Israeli banks.

Hungary Small Flag Hungary

HNB as regulator shall identify credit institutions qualifying globally or systematically important taking into account certain features of the given institutions, such as – among others – the size and complexity of the group. The HNB shall also allocate global systemically important credit institutions in at least five sub-categories in a way that the lowest sub-category shall contain the credit institutions which are considered the least important systemically provided that there shall be a constant and linear increase of systemic significance in the sub-categories. The cut-off thresholds between the sub-categories shall be defined clearly. According to the Hungarian Banking Act, credit institutions allocated to the lowest sub-category shall maintain a capital buffer of 1 % of the total risk exposure amount calculated in accordance with the CRR for global systemically important credit institutions. The buffer assigned to each sub-category shall increase in gradients of 0.5 % to and including the fourth sub-category, but the credit institutions allocated to the highest sub-category shall be subject to a buffer of 3.5 %.

Furthermore, other systemically important credit institutions, as identified by the HNB, are required to maintain specific capital buffer for on an individual, sub-consolidated or consolidated basis in addition to the capital requirement imposed by the CRR as well as to other type of capital buffers. Such specific capital buffer shall consist of CET 1 capital, the rate of which shall be up to 2 % of the amount of total risk exposure calculated in accordance with the CRR. Both the rate of such capital buffer and the affected credit institutions shall be revised by HNB annually.

Latvia Small Flag Latvia

Authorities are expected to impose higher own funds requirements on global systemically important institutions (G-SIIs) in order to compensate for the higher risk that G-SIIs represent for the financial system and the potential impact of their failure on taxpayers.

The identification methodology for G-SIIs shall be based on the following categories:

(a) size of the group;

(b) interconnectedness of the group with the financial system;

(c) substitutability of the services or of the financial infrastructure provided by the group;

(d) complexity of the group;

(e) cross-border activity of the group, including cross border activity between Member States and between a Member State and a third country.

Each category shall receive an equal weighting and shall consist of quantifiable indicators.
The special regime for G-SIIs in Latvian jurisdiction stems from the EU law.

Lithuania Small Flag Lithuania

There are no globally systemically important banks in Lithuania.

In December 2015, the BoL identified and declared systemically important institutions in Lithuania, which were made subject to additional capital buffer requirements. From end-2016 onwards, an additional capital buffer of 2% has been applied to AB SEB bankas, Swedbank AB and AB DNB bankas (current name – Luminor), and a 0.5% buffer to AB Šiaulių bankas.

Poland Small Flag Poland

None of the Polish banks are considered to be globally systemically important banks. However, there are five Polish banks which are regarded as “Other Systemically Important Institutions” (O-SIIs), namely: Bank Zachodni WBK S.A., mBank S.A., ING Bank Śląski S.A., Bank Polska Kasa Opieki S.A. and Powszechna Kasa Oszczędności Bank Polski S.A. Each of these banks must satisfy stricter capital requirements.

Romania Small Flag Romania

The NBR has decided to implement an O-SII buffer (the capital buffer for other systemically important institutions) on an individual, sub-consolidated or consolidated basis, applicable of 1% of the total risk exposure amount, for all credit institutions identified as systemically important. The provisions regarding the O-SII buffer were implemented in Romania through local regulation on prudential requirements for credit institutions.

India Small Flag India

In 2014, the RBI has implemented a framework on domestic systemically important banks (D-SIBs). The Indian framework (which is broadly similar to the BCBS framework) also uses size, interconnectedness, substitutability and complexity and as the broad indicators and the outstanding notional amount of OTC derivatives, tradable securities inventory, etc. as sub-indicators for determining systemic importance. D-SIBs may be placed in one of four buckets depending upon their systemic importance scores (SISs) and are subject to loss absorbency capital surcharge in a graded manner depending on the buckets in which they are placed. A D-SIB in lower bucket will attract lower capital charge and a D-SIB in higher bucket will attract higher capital charge. The additional common equity tier 1 (CET1) capital requirement will be in addition to the capital conservation buffer that is required in under the Indian regulations.

The identification of D-SIBs is a two-step process. In the first step, sample of banks to be assessed for their systemic importance are identified. Smaller banks are typically exclude at this stage. The second step is the detailed exercise to compute the banks’ systemic importance based on a range of indicators. The banks having SISs above a particular threshold are designated as D-SIBs. The additional capital requirements for the D-SIBs became applicable in a phased manner since 1 April, 2016 with 1 April, 2019 as the final deadline.

Foreign global systemically important banks (G-SIBs) having branches in India need to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, but proportionate to its risk-weighted assets (RWA) in India.

At present, three banks, namely, State Bank of India, ICICI Bank Limited and HDFC Bank Limited have been declared as D-SIBs. The RBI requires the D-SIBs to maintain an additional CET1 capital ratio ranging from 0.2 per cent to 0.8 per cent.

Japan Small Flag Japan

The FSA designated three banking groups as globally systemically important banks (G-SIBs) and two banking groups as domestic systemically important banks (D-SIBs) in 2015. Both categories are subject to capital surcharge and are required to maintain higher Common Equity Tier 1 ratios.

G-SIBs and D-SIBs are also required to have recovery and resolution plans, and to comply with the Principles for Effective Risk Data Aggregation and Risk Reporting issued by the Financial Stability Board (FSB).

Under the FSA’s Supervisory Guidelines, G-SIBs are required to establish a nominating committee, an audit committee and a compensation committee (see No. 8), or have each of their major banking subsidiaries appoint an independent director.

Malta Small Flag Malta

There are three domestic systemically important banks in Malta, referred to as Other Systemically Important Institutions (“O-SII”). Such O-SIIs are subject to an additional capital buffer which is aimed at mitigating the vulnerability of the domestic financial system and the real economy to the failure of systemically important institutions. The O-SII capital buffer is a macro-prudential tool legally embedded in the CRDIV/CRR framework which, in turn, has been domestically transposed in Central Bank of Malta Directive No. 11 and MFSA Banking Rule 15. The O-SII buffer consists of a capital surcharge applied to institutions that may, in the event of failure or impairment, have considerable impact on the financial system and the real economy. This additional capital buffer is applied to domestically significant institutions to increase their resilience by increasing their loss absorbing capacity and thus ensuring that they pose minimal risk to the domestic economy in the form of externalities.

Nigeria Small Flag Nigeria

In Nigeria, there exists a special regime for Domestic Systemically Important Banks. The CBN and the NDIC in 2014 issued a Framework for the Regulation and Supervision of Domestic Systemically Important Banks (SIBs) In Nigeria. The Framework took effect in 1 March 2015. The objective of the Framework is to ensure that all SIBs are subjected to appropriate degree of oversight and regulation such as maintaining in addition to the stress test and Liquidity Coverage Ratio (LCR) imposed on other banks, SIBs are required to maintain a CAR of 15%, set aside Higher Loss Absorbency (HLA) or additional capital surcharge of 1% to their respective minimum required CAR. This entails defining the regulatory parameters and calibrating the intensity of oversight by the regulators in Nigeria.

Norway Small Flag Norway

Yes. Domestic systematically important banks are subject to additional Tier 1 capital buffer on 2 percent as well as additional leverage ratio buffer on 1 percent, see also question 11. Pursuant to a co-operation agreement in place between the FSAs of the Nordic countries (Norway, Sweden, Finland and Denmark), banks defined as systematically important and operating in the Nordic countries are subject to certain coordinated ongoing supervision by the Nordic FSA, see also answer to question 14.

Portugal Small Flag Portugal

Banco de Portugal is responsible for the identification of globally systemically important banks (G-SIIs) on a consolidated basis and other systemically important banks (O-SIIs) on an individual, subconsolidated or consolidated basis (where applicable).

G-SIIs are identified according to a methodology based on the following criteria:

a) size of the group;

b) interconnectedness of the group with the financial system;

c) substitutability of the services or of the financial infrastructure provided by the group;

d) complexity of the group;

e) cross-border activity of the group.

G-SIIs are allocated into five different sub-categories. Each G-SII shall maintain (on a consolidated basis) a G-SII buffer consisting of Common Equity Tier 1 Capital which, in its turn, shall correspond to the sub-category to which the G-SII is allocated.

O-SIIs are identified according to an assessment based on at least one of the following criteria:

a) size;

b) importance for the economy of the European Union or of Portugal;

c) significance of cross-border activities;

d) interconnectedness of the credit institution or group, as applicable, with the financial system.

Banco de Portugal may require each O-SII to maintain an O-SII buffer consisting of Common Equity Tier 1 capital of up to 2% of the total risk exposure amount. When requiring an O-SII buffer to be maintained, Banco de Portugal shall review that requirement annually and ensure that it does not entail disproportionate adverse effects on the whole or parts of the financial system of other Member States or of the Union, forming or creating an obstacle to the functioning of the internal market.

Qatar Small Flag Qatar

Qatar has adopted the Basel III standards.

Qatar’s ‘systematically important’ banks are required to maintain additional capital charge. Effective from 2016, the domestic systemically important banks (D-SIBS) have to maintain additional capital charge in a phased manner with full implementation by January 2019.

The Qatar Central Bank (QCB) has issued the Basel III Capital Adequacy guidelines to all Qatari banks in January 2014, with the minimum requirements for capital adequacy and capital conservation buffer.

In July 2014, the QCB advised the local banks on the framework of D-SIBS, which have high loss absorption capital requirement ranging from 0.5 percent to 2.5 percent.

The QCB had issued a Liquidity Coverage Ratio (LCR) circular to banks in January 2014 and it was amended in May 2014 to incorporate the changes effected by the Basel Committee on Banking Supervision (BCBS).

A separate circular on Leverage Ratio was also issued in July 2014.

The QCB observed that the local banks made good progress on developing the financial markets and related infrastructure to meet international standards and best practices in order to provide a conducive and investor friendly environment. Specifically, major steps have been taken to develop deep and liquid debt markets through regular issuance of Treasury bills as well as government securities.

Switzerland Small Flag Switzerland

Yes, Swiss systemically important banks must meet special capital requirements (quantity and quality, see above at Question 10.), liquidity requirements (see above at Question 12.), risk diversification requirements (measured against their CET1 rather than their total capital) as well as emergency planning requirements. GSIBs also have to comply with a gone concern requirement (see at Question 23.).

Turkey Small Flag Turkey

The Regulation on Systemically Important Banks (the “SIB Regulation”) sets forth the criteria for the determination of systemically important domestic banks (the “SIBs”) and such determination shall be made on an indicator based measurement approach comprising of the indicators reflecting the (i) size; (ii) interconnectedness; (iii) complexity; and (iv) substitutability of a bank. The calculation pertaining to the systemic importance of a bank shall be based on the consolidated financial data belonging to the previous year and be re-calculated each year.

Pursuant to the SIB Regulation, SIBs shall maintain a ‘SIB buffer’ to be calculated based on the ratios set forth under the SIB Regulation, for a period of 1 year following the determination of such banks as a SIB. Furthermore, SIBs are subject to additional core capital requirements to be determined based on the SIB buffer ratios (and the risk weighted assets on a consolidated basis) in addition to the additional core capital requirements set forth under the CM Regulation.

The SIB Regulation envisages different SIB buffer ratios applicable to each group of SIBs. As such, SIB buffer ratios are determined as (i) 1% for the 1st group, (ii) 1,5% for the 2nd group; (iii) 2% for the 3rd group and (iv) 3% for the additional 4th group to be established if need be, however, these ratios are applied as (i) 0,75%; (ii) 1,125%; (iii) 1,5% and (iv) 2,25% for the year 2018 due to the transition period granted to SIBs until January 1, 2019.

Austria Small Flag Austria

The BWG provides for a special capital buffer regime for national Global Systemically Important Institutions (sec 23b BWG) and Systemically Important Institutions (sec 23c BWG). The FMA can require SIIs (by FMA Regulation) to implement a capital buffer of up to 2% of CET 1 in addition to the capital requirements set out in Article 92 CRR.

Bulgaria Small Flag Bulgaria

The G-SII buffer is not applicable to subsidiaries of banks licensed within the EU, so the buffer has not been applied in Bulgaria, so far. BNB has applied O-SII buffer to strengthen the capacity of important Bulgarian banks for covering losses and limiting the risk of transfer of potentially stressful situations to other banks or the banking system as a whole.

Upon determining the rate of the O-SII buffer, BNB follows the instructions of the EBA and the European experience, while simultaneously considering additional indicators for the importance of banks for the national economy.

From the beginning of 2018, eleven Bulgarian banks are required to apply the initial O-SII rates as fixed by BNB.

Ecuador Small Flag Ecuador

No, there is no special regime in the Ecuadorian legislation.

Ireland Small Flag Ireland

Under CRDIV, systemically important financial institutions are subject to rules relating to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs). G-SIIs and, subject to home state discretion, O-SIIs must adhere to prescribed levels of CET1 to be held as a buffer.

The CBI is the designated authority charged with identifying credit institutions as G-SIIs (on a consolidated basis) and O-SIIs (on an individual basis).

To be a G-SII, the credit institution must be one of the following:

  1. an EU parent institution;
  2. an EU parent financial holding company;
  3. an EU parent mixed financial holding company; or
  4. a bank or an investment firm.

Systemic importance is assessed by the CBI (as the designated authority charged with identifying credit institutions as O-SIIs) on the basis of at least one of the following criteria:

  1. size;
  2. importance for the economy of the EU or Ireland;
  3. significance in terms of its cross-border activities; or
  4. interconnectedness of its group with the financial system.

Where a group is subject to a G-SII buffer and a separate O-SII buffer, the higher will apply.

The CBI reviews its O-SII designations annually. The CBI’s 2017 review resulted in six credit institutions being designated as O-SIIs, namely, AIB, BOI, Citibank Holdings Ireland Limited, Ulster Bank Ireland DAC, Unicredit Bank Ireland plc and DePfa Bank plc. All O-SIIs are subject to varying O-SII buffers with phase in periods from 1 July 2019 to 1 July 2021.

Under CRDIV each member state may introduce a systemic risk buffer of CET1 capital for the financial sector or one or more subsets of that sector. Ireland has not implemented this measure but may recognise buffers introduced by other member states.

France Small Flag France

The ECB supervises systemically important financial institutions. In France, these institutions are point out by the ACPR so that special supervision measures as additional capital requirement can be applied to them in order to reduce the risks involved.

Belgium Small Flag Belgium

Yes, both regimes have been implemented in line with the CRD IV package.

Estonia Small Flag Estonia

Eesti Pank assesses the systemic importance of credit institutions each year and updates the list of credit institutions that are important to the domestic financial system. Eesti Pank uses the guidelines issued by the European Banking Authority (EBA) for its assessment, and also considers the specific features of the Estonian financial system.

Eesti Pank may determine the requirement for global systemically important credit institutions buffer as follows:

  1. the requirement for the lowest category of the global systemically important credit institutions buffer is one per cent of the total risk exposure amount calculated pursuant to Article 92 (3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council;
  2. for each following category, except for the highest category, the rate specified in clause 1) of this section shall be added 0.5 per cent of the total risk exposure amount calculated pursuant to Article 92 (3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council;
  3. the requirement for the highest category of the global systemically important credit institutions buffer is 3.5 per cent of the total risk exposure amount calculated pursuant to Article 92 (3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council.

A global systemically important credit institution is required to maintain the global systemically important credit institutions buffer on a consolidated basis.

Greece Small Flag Greece

The four (4) systemic Greek banks fall within the scope of prudential supervision of the ECB in view of their role in maintaining stability in the economy of the EU (see also Question 1 above).

In addition, Law 4261/2014 transposes the provisions of article 131 of Directive 2013/63/EU pertaining to Global-Systemically Important Institutions ('G-SII') and Other-Systemically Important Institutions ('O-SII'). G-SII and O-SII are identified on the basis of criteria such as their size, interconnection with the financial system, complexity, substitutability of services and range of cross-border activities; given their importance for the economy, the BoG is entitled to determine specific capital buffer requirements applying to such institutions.

Germany Small Flag Germany

Yes. Germany is participating country in the EU’s Single Supervisory Mechanism (SSM) and as such, significant banks having their seat in Germany are under direct supervision of the ECB.

United States Small Flag United States

Yes. Large financial institutions generally pose the greatest risk to the financial system due to their size, complexity and interconnectedness, and they are accordingly subject to heightened regulation in the US. The largest and most complex bank holding companies and nonbank financial companies designated by the US Financial Stability Oversight Council as ‘systemically important’ (systemically important financial institutions or SIFIs) are subject to FRB supervision and significantly heightened expectations.

Institutions with total consolidated assets of at least $50 billion that have not been designated as ‘systemically important’ are subject to some heightened expectations to a lesser degree than institutions that have received the designation. Foreign banking organizations with consolidated US assets in excess of $50 billion (other than as part of their branch or agency) are required to have an intermediate bank holding company that holds their US assets subject to comprehensive US supervision.

Colombia Small Flag Colombia

The only difference between domestic and global banks is that the first must operate under the form Corporations (Sociedad Anónima) or Cooperative Associations (Asociaciones Cooperativas), and the second can operate as a branch of the foreign bank. Either way, both must compel with the requirements, sanctions, measures and regulation imposed by the authorities described in question one.

Finland Small Flag Finland

Specific criteria and regulation in respect of global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) exist. G-SIIs are defined as institutions whose insolvency can endanger the global financial markets. G-SIIs are defined at an international level by the international Financial Stability Board in consultation with the Basel Committee on Banking Supervision and national authorities. Pending the move of the Nordea group to Finland, there are currently no G-SIIs in Finland.

O-SIIs are defined as credit institutions whose insolvency could have a highly negative impact on the entire financial system. The Act on Credit Institutions requires that the FFSA designates the O-SIIs in Finland and the additional capital requirements to be imposed on them.

G-SIIs and O-SIIs are further subject to separate regulations on capital buffers and remuneration as set out above in questions 9 and 10.

United Kingdom Small Flag United Kingdom

Certain parts of UK regulation (for example in relation to TLAC) deal specifically with globally systemically important banks (with the UK being home to 5 of them).

Updated: February 14, 2018