- The Basel Committee on Banking Supervision has published a consultation on potential measures to address window-dressing behaviour in the context of the framework for global systemically important banks (G-SIBs).
- Potential revisions would require banks to report and disclose the indicators used to calculate G-SIB scores based on average values over the reporting year, rather than year-end value.
The Basel Committee on Banking Supervision issued a consultation on revisions to the global systemically important bank (G-SIB) assessment framework aimed at mitigating “window-dressing” behavior by some banks in the context of the G-SIB framework.
Such regulatory arbitrage behavior seeks to temporarily reduce banks’ perceived systemic footprint around the reference dates used for the reporting and public disclosure of G-SIB scores.
As noted previously by the Committee, window-dressing by banks is unacceptable. Such behavior undermines the intended policy objectives of the Committee’s standards and risks disrupting the operations of financial markets.
The proposed revisions aim at constraining banks’ ability to lower their G-SIB scores through window-dressing. This will be achieved by requiring banks participating in the G-SIB assessment exercise to report and disclose most G-SIB indicators based on an average of values over the reporting year, rather than year-end values. An accompanying working paper sets out the analysis supporting the consultation.
Also published is a working paper assessing the G-SIB score dynamics over the past decade.