The reforms aimed at the treatment of systemic institutions may be grouped under two major headings: supervisory measures and new legal frameworks. 2  BIS central bankers’ speeches  Addressing firstly supervisory measures, solvency requirements for these systemic institutions have been tightened. Such tightening, on top of the levels set under Basel III, has been implemented in two phases. An initial step involved the Basel Committee establishing a methodology, based on five indicators, to identify these institutions. These indicators reflect the size of banks, their interrelatedness, the lack of substitutes for the services they provide, the global scope of their activity and their complexity. The following step was to impose capital surcharges, on a staggered scale from 1% to 2.5%. The second group of reforms refers to resolution, which involves an authority restructuring a bank through the use of specific tools, with the aim of ensuring the continuity of the bank’s critical functions and thus preserving financial stability. The essential characteristics all resolution regimes must meet were listed in the FSB document entitled “Key Attributes for Effective Resolution Regimes”. This has been one of the most important agreements reached to date on the matter. Resolution In the European sphere, the Bank Recovery and Resolution Directive have recently been approved, incorporating the FSB guidelines into the acquis communautaire. In Spain, Law 9/2012 of 14 November 2012 on the restructuring and resolution of credit institutions had already foreseen several of the elements required in this area by the FSB and by the Directive.

Finally, I should mention the agreement reached to introduce a new supervisory instrument, the leverage ratio, which is not directly linked to a bank’s level of risk; for this reason, it counters to some extent the potential shortcomings present in internal models for calculating capital needs. That leads us to one of the major issues currently under consideration: the use of internal models for evaluating the weighting of risks. There is known to be wide-ranging variability in the calculation of risk-weighted assets across different banks. The Basel Committee itself has published a report on this matter, and increasing numbers of experts and regulators deem it advisable to study the implications of the use of internal models in terms of how they affect the lack of transparency in the calculation of capital requirements and in order to ensure a level playing field for all banks. The prudential regime of systemic banks: more capital and a resolution framework A further aim of the FSB has been to eradicate, or at least alleviate, the externalities created by systemic “too-big-to-fail” institutions. Systemic banks are those which, given their interrelatedness, size and complexity, might entail, in the event of bankruptcy and disorderly liquidation, serious difficulties for the rest of the financial system. The systemic repercussions of the collapse of a bank of such characteristics, as evidenced following the Lehman Brothers bankruptcy, was the driving force behind the authorities having subsequently to bail out other institutions, with the ensuing burden on public funds.