Bloomberg is reporting that international regulators have agreed on a way to identify banks that if they failed would undermine financial stability by developing “a methodology that embodies the key components of systemic importance” to allow for the “differentiated treatment of systemic institutions without needing to specify a fixed list” of lenders. The Group of 20 nations has called for capital surcharges for lenders to prevent their collapse from impacting the wider financial system, and the Basel system was asked by the Financial Stability Board to draft the requirements for systemically important lenders. According to Stefan Walter, secretary general of the Basel Committee on Banking Supervision, the Basel group’s parameters for measuring the lenders “are size, interconnectedness, substitutability, global activity, and complexity.”
Basel develops method to identify banks posing systemic risk
The Basel Committee on Banking Supervision will judge companies’ systemic importance by their size, interconnectedness, substitutability, global activity and complexity.
April 7, 2011