The Basel Committee has published amendments to address window-dressing behaviour in the framework for global systemically important banks (G-SIBs). Under the finalised changes, banks must report and disclose the indicators used to calculate G-SIB scores on average values over the reporting year, rather than year-end values, by January 2030.
The amendments aim to constrain banks' ability to lower their G-SIB scores through window-dressing. The committee said such behaviour undermines the intended policy objectives of its standards and risks disrupting the operations of financial markets.
EVIDENCE OF YEAR-END SEASONALITY
There is solid evidence of window-dressing and year-end seasonality in the indicators that underlie the calculation of the score in the G-SIB framework. Some studies have also found that the framework itself can provide an incentive for window-dressing behaviour.
An explanation for this may lie in the relatively large size of the buckets and the sizeable step changes in the associated capital buffers. A bank's G-SIB score is calculated as a weighted average of the underlying indicator scores. The bank sample relevant for the denominator calculation is determined by the 75 largest banks according to the total leverage ratio exposure measure.
BANKING UNION EXPOSURES UNDER CONSULTATION
Alongside the finalised amendments, the committee is consulting on whether to incorporate its previously agreed treatment of cross-border exposures within the European Banking Union (EBU) into the G-SIB methodology.
The Basel Committee is the primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. It reports to the Group of Central Bank Governors and Heads of Supervision and seeks its endorsement for major decisions.
BUFFERS AND THE NEXT G-SIB LIST
The capital buffer requirements for the G-SIBs identified in the annual update each November apply to them from January fourteen months later. A new list of G-SIBs will next be published in November 2026. The Basel Committee also publishes the thirteen high-level indicators of the banks in the assessment sample used in the G-SIB scoring exercise for 2025.