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Asian banks accept G-Sifi surcharge

Wednesday 31 August 2011 - by Andrew Hickley

Banks from emerging markets have resisted criticising a capital surcharge on worldwide banks, in contrast to peers in Europe and North America, in a key Basel consultation.

But while an additional capital buffer to help protect globally systemically important banks is offered some support, banks from around Asia, and Columbia, argue that a number of tweaks are needed to G-Sifi proposals overall.

The viewpoints are expressed in a series of written responses to a consultation by the Basel Committee on Banking Supervision, published publicly on Wednesday.

The state-owned Bank of China calls for contingent capital to be allowed to be issued as part of the surcharge, arguing that with tier one capital already used to fill Basel III capital requirements, financing pressure on the capital market will "further intensify" without alternative funding.

The bank also calls for the Basel Committee on Banking Supervision to conduct an analysis to ensure there is no difficulty in collecting or submitting data necessary to assess their global weighting.


It also argues that a central assessment database used by the Basel Committee must be disclosed at a "proper time" in order to improve "openness and transparency" on its overall assessments of global banks.

Meanwhile the Japanese Bankers Association - which expresses the most faith of the emerging market groups in the use of the surcharge - moots the idea of contingent capital as part of the capital buffer.

"The JBA believes the risks caused by global systematically important banks (G-SIBs) can be alleviated not only by capital surcharges, but also by locally established frameworks such as deposit insurance or other bankruptcy resolution legal systems and lending limits," it says.

"In accordance with the levels of various regulations and systems and characteristics of business models in different countries, qualitative assessments by local authorities should be seriously respected."

The JBA reveals strong support for the multiple-indicator approach and bucketing strategy that will see banks facing surcharges depending on their magnitude of their operations over five different criteria.


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