WSBI understands that the changes proposed by the BCBS would provide benefits to the current framework, as it helps clarify objectives as to the mitigation of window-dressing and would help mitigate window dressing concerns through the averaging frequencies (as opposed to year-end values). This would help make the framework more flexible and transparent and improve the overall quality of the data. However, WSBI firmly believes that potential improvements should ensure a more proportional G-SIB framework, with reduce reporting requirements for all banks

Flexible, transparent and practical – Advantages of the revised G-SIB Assessment Framework

WSBI understands the methodological changes proposed by the BCBS regarding window-dressing behaviours by banks helps are clearly outlined. The proposed shift from year-end values to averaging over the financial year for G-SIB indicators is certainly a positive step to mitigate concerns linked to this practice. It furthermore allows for a more accurate reporting and promotes consistency and fairness in the assessment process for banks. Lastly, the different approaches to applying averaging requirements demonstrates flexibility in addressing potential reporting burdens, which can help enhance data quality and consistency across different subsets of banks.

A sound proposal, but with significant challenges for banks
WSBI recognises that challenges linked to the valuation of certain indicators at high frequencie, providing flexibility to report lower-frequency averages for specific variables would ensure practicality without compromising the overall effectiveness of the framework. It is moreover essential to recognize that transition to daily averaging methodologies may necessitate significant infrastructure support and operational adjustments for reporting banks. The requirement to calculate and submit daily average values for G-SIB indicators poses technical challenges that must be addressed. Moreover, implementing a system capable of capturing, processing, and reporting daily averages will likely require substantial costs, particularly as investment in technology and human resources, for reporting banks.

A more proportional and less burdensome G-SIB assessment framework – Suggestions for improvement

Against the backdrop of the review, WSBI would like to reiterate that the proposal ensures a more proportional G-SIB framework, with reduced reporting requirements. The cost of the necessary modifications of bank’s information systems that would need to be performed to obtain monthly data and the consequent increase of bank’s resources that would have to be assigned to this task could be disproportionate to the potential increase in consistency and reliability of the information reported by the entities. Regulators should there consider a phased approach to implementing these requirements, with gradual rollout times, which can gran banks sufficient time to upgrade and adapt their processes without compromising data integrity. Additionally, the BCBS should take into account materiality of each entity and their weight in terms of those indicators that are more likely to incentivise window-dressing behaviours during the G-SIB assessment exercise. That would contribute to setting more proportional, risk-sensitive, and meaningful requirements. Informational requirements should be proportionate to “window-dressing risks”. As such, by tailoring reporting to the specific operation situation of a bank, it would be more practical to limit the assessment to monthly averages and quarterly average reporting should be sufficient to achieve the BCBS objectives on this matter