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  • European Banking Authority Reports Good Compliance with its Guidelines for Identification of Other Systemically Important Institutions

    11/15/2017
    The European Banking Authority has published a report setting out the outcomes of its ongoing peer review exercise into whether its 2014 Guidelines specifying the criteria for the identification of Other Systemically Important Institutions (O-SIIs) have been applied effectively. National regulators from the EU Member States and the supervisory authorities of the three countries of the European Economic Area participated in the peer review exercise. The EBA report concludes that the majority of national regulators are compliant, but notes deviations from the Guidelines in some jurisdictions.

    O-SIIs are institutions that are not classed as globally systemically important financial institutions but whose failure would have a significant negative effect on the financial system, either at EU level or at the level of an EU Member State. Institutions identified as O-SIIs attract stricter regulatory requirements under the Capital Requirements Directive, in particular the "O-SII buffer" which focuses on reducing the institution's probability of default.

    The EBA was mandated under the CRD to issue the Guidelines to promote consistent identification of O-SIIs. The Guidelines establish a minimum mandatory framework of criteria and indicators for identifying O-SIIs. This framework serves as the initial benchmark. National regulators are encouraged to complement the minimum framework with further optional criteria and indicators to reflect the specificities of each national banking sector. In its Report, the EBA highlights best practices that it has observed. However, it also notes different approaches taken by national regulators on how to maintain the O-SIIs' identification methodology up-to-date and meet disclosure requirements and considers that the notification and disclosure obligations would benefit from greater harmonization. The EBA recommends that the list of optional indicators included in the Guidelines should be expanded to align these indicators with national regulators' practices and requests. It also recommends improvements to the effectiveness and comprehensiveness of disclosure and notification requirements, by means of adjustments to the Guidelines and to the notification template.

    The EBA also considers that it would be desirable if further guidance could be provided to reduce variation in the calibration and use of the O-SII buffer. However, it does not set out guidance for this, as it falls within the remit of European Commission work on the EU macro-prudential framework in the context of the revision to the CRD and the Capital Requirements Regulation.

    View the Final Peer Review Report.

    View the EBA Guidelines.