September 3, 2021
Secretariat of the Basel Committee on Banking Supervision
Bank for International Settlements
CH-4002 Basel, Switzerland
Japanese Bankers Association

JBA comments on the BCBS Technical Amendment: “G-SIB assessment
methodology review process”
Dear Sirs/Madams:
The Japanese Bankers Association1 (JBA) appreciates the opportunity to provide our comments on the BaselCommittee on Banking Supervision’s (BCBS) Technical Amendment: “G-SIB assessment methodology review
process”2 (the Proposed amendment) released on July 20, 2021.
We understand that the purpose of the Proposed amendment to replace a three-year review cycle with anevidence-based review is to ensure that the G-SIB assessment methodology review process be consistent with
the GHOS agreement 3 , i.e., “any further potential adjustments to Basel III will be limited in nature andconsistent with the Committee's evidence-based evaluation work”. If the new approach facilitates freeing up
resources at banks and supervisory authorities compared with the current three-year review cycle, that would
be welcomed.
However, the proposed evidence-based approach could entail inherent disadvantages in transparency andpredictability. In moving toward the proposed evidence-based approach, not only merely making a technicalamendment to SCO 40.30, but also a robust framework that addresses the said disadvantages are required. The
following are the issues of the Proposed amendment and our counterproposals to address them.
1. Transparency of the review process
The Proposed amendment states “[o]nly if this monitoring work reveals evidence of material unintended
consequences or material deficiencies with respect to the framework’s objectives will the Committee consider
changes to the regime.” While the concept itself is generally understandable, we are concerned that it lacks aframework governing the process to consider the changes. In particular, it is unclear (i) who is responsible for
ongoing monitoring “material unintended consequences or material deficiencies”, (ii) how such monitoring isresponsibly carried out.
Unintended consequences or deficiencies are not limited to distortions of the global financial system. They may
occur for banks in a jurisdiction due to, for example, changes in the monetary policy or regulations in thatjurisdiction, and may even occur at the individual bank level. Under the current three-year review cycle, theBCBS was able to receive broader feedback from financial authorities in each jurisdiction and the private sector
through a formal periodical consultation process. We think it is questionable whether the evidence-based
approach can function as intended without such a feedback process.
We therefore respectfully request that the decision-making and review process concerning the revised
SCO 40.30 be formally and clearly documented. They should at least include a tangible feedback process
1

The Japanese Bankers Association is the leading trade association for banks, bank holding companies and bankers associations inJapan. As of September 3, 2021, the JBA has 114 Full Members (banks), 3 Bank Holding Company Members (bank holding companies),
74 Associate Members (banks & bank holding companies), 58 Special Members (regionally-based bankers associations) and one SubAssociate Member for a total of 250 members.
2 https://www.bis.org/bcbs/publ/d522.htm
3 Ibid.

1and communication mechanism with the private sector.
2. Predictability of the review
The three-year review cycle has the advantage in predictability for stakeholders. Given that the objective of GSIB scoring is to “provide an absolute measure that banks could target to reduce their scores”4, we believe thatthe “predictability” is an essential nature of the G-SIB methodology. Unless a framework that provides
predictability of the evidence-based approach is provided, it should be noted that the approach could undermine
the objective and may lead to an uneven burden for all banks with an overall size exceeding EUR 200 billion
that are subject to the disclosure requirements of the methodology. It should also be noted that it may take areasonable period of time for banks to develop the internal framework necessary for complete and accurate
aggregation, such as the establishment of internal systems, internal procedures, and dry runs, etc., depending on
the changes to the methodology.
We therefore urge the BCBS to incorporate processes that ensure predictability into the evidence-basedapproach. This should include, for example, having communication closely with banks prior to the formal
consultation process for the changes and providing banks with a sufficient preparation period that allows
banks to develop a system for obtaining precise figures under the revised methodology.
3. Other related issues
We believe that “material unintended consequences or material deficiencies” include cases where the changes
in score are driven by non-behavioral factors at banks and the indicator-based measurement approach no longer
reflects negative externalities of banks for the stability of the financial system. Those noises for G-SIB scoringshould be carefully monitored and eliminated to ensure fairness and reliability of the indicator-based framework.
For example, banks in non-EU jurisdictions are generally required to use the year-end exchange rate in order toconvert their reporting currencies to EUR for score calculation. As we commented on the previous consultation
document5, such conversion rules could lead to unreasonable changes in score when the exchange rate fluctuatessignificantly at the end of the period, even if there is no structural change in behavior that affects the systemicrisk of banks.
Therefore, we request that the BCBS provide guidance for adjustments in case where the year-end
exchange rate used for the conversion fluctuates significantly compared with the average exchange rateand the changes in scores of banks in the jurisdiction becomes unreasonable.
(End)

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5

https://www.bis.org/publ/bcbs255.pdf
https://www.zenginkyo.or.jp/fileadmin/res/abstract/opinion/opinion290643.pdf

2