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Part III Quantitative Capital Requirements, 14 Capital Buffers for Systemically Important Banks and the Systemic Risk Buffer

Tobias H. Tröger

From: Capital and Liquidity Requirements for European Banks (1)

Edited By: Bart P.M. Joosen, Marco Lamandini, Tobias H. Tröger

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 03 March 2024

Subject(s):
Regulation of banks — Credit risk — Basel 1 — Basel 2 — Basel 3 — Capital requirement — Basel committee on Banking Supervision

This chapter highlights the capital buffer requirements that specifically address systemic risks that either flow from an institution’s indispensable position in the financial system (i.e., globally and other systemically important institutions, G-SIIs and O-SIIs) or from sector-wide risks that potentially afflict all, or a systemically relevant fraction of, banks. It begins by looking at the regulatory rationale that underpins the Basel Committee on Banking Supervision (BCBS) recommendations and their European implementation. The chapter then considers the interrelationship between buffer and other capital requirements. Where a group, on a consolidated basis, is required to maintain both a G-SII buffer and an O-SII buffer, only the higher of the two shall apply. Where an O-SII is the subsidiary of a G-SII or of an institution or of a group headed by an EU parent institution, the O-SII buffer rate that applies to the subsidiary on an individual or sub-consolidated basis is restricted, reflecting the additional loss-absorbing capacity that stems from the entity’s group affiliation.

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