Consultative Document: Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions

8 January 2014

At the Cannes Summit in November 2011, the G20 Leaders asked the Financial Stability Board (FSB), in consultation with the International Organization of Securities Commissions (IOSCO), to prepare methodologies to identify systemically important non-bank non-insurer (NBNI) financial entities. In response to the G20 request, the FSB tasked its Workstream on Other Shadow Banking Entities (WS3) to prepare, in consultation with IOSCO, proposed assessment methodologies for identifying non-bank non-insurer global systemically important financial institutions (NBNI G-SIFIs). This task was reaffirmed at the G20 Summit in St Petersburg on 5-6 September 2013, when the G20 Leaders asked the FSB, in consultation with IOSCO and other standard-setting bodies, to develop for public consultation methodologies for identifying NBNI G-SIFIs by the end of 2013.

Systemically important financial institutions (SIFIs) are 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. At the Seoul Summit in 2010, the G20 Leaders endorsed the FSB framework for reducing the systemic and moral hazard risks posed by SIFIs.

The implementation of the SIFI framework requires, as a first step, the assessment of the systemic importance of financial institutions at a global level (or G-SIFIs). The framework recognises that SIFIs vary in their structures and activities, and that systemic importance and impact upon distress or failure can vary significantly across sectors. It requires that the FSB and national authorities, in consultation with the standard-setting bodies, and drawing on relevant indicators, determine which institutions will be designated as G-SIFIs. The assessment methodologies to identify G-SIFIs need to reflect the nature and degree of risks they pose to the global financial system. To date, assessment methodologies have been developed for global systemically important banks (G-SIBs) and insurers (G-SIIs).

This document sets out, for public consultation, the proposed assessment methodologies for identifying NBNI G-SIFIs, extending the SIFI framework that currently covers banks and insurers to all other financial institutions. This is challenging as the high-level framework and specific methodologies have to capture a wide range of business models and risk profiles, while maintaining broad consistency with the methodologies for banks and insurers. Also, unlike banks and insurers, the NBNI financial entities generally face limitations in the data availability.

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