SFIG to Comment on Basel’s Identification and Management of Step-In Risk

On Wednesday, March 15th, the Basel Committee on Banking Supervision (BCBS) issued a consultative document on the Identification and management of step-in risk.

Building on comments from the previous consultation, BCBS expanded the identification criteria to take into account the risk characteristics of the entities involved in addition to the banks' relationships with them. As stated in the release, BCBS does not anticipate making significant changes to the revised framework which it views as near-final.

SFIG previously commented on the initial proposal in March 2016, and will respond to this request for comment as well. In our letter, we cautioned the Committee that the enactment of a framework to address step-in risk may be unnecessary in light of existing Basel III reforms and other changes since the financial crisis. SFIG members believe that if a step-in proposal is adopted without an appropriate delinking of regulatory capital treatment from GAAP consolidation, capital redundancy would be further exacerbated. Comments are due by May 15, 2017.

If you would like to join SFIG’s Regulatory Capital & Liquidity Committee, please contact Alyssa.Acevedo@sfindustry.org.

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