The Basel Committee on Banking Supervision on 16 October finalised amendments that require banks to report the indicators behind their global systemically important bank (G-SIB) scores as averages over the year, replacing year-end values. The change targets “window dressing”, the practice of shrinking a balance sheet around the reporting date to lower a bank’s measured systemic footprint and, with it, its capital surcharge. The averaging applies by 1 January 2030. A separate change, raising the reporting threshold from EUR 200 billion to EUR 350 billion, applies from 2027.
Window dressing has a direct capital payoff
G-SIB scores determine which banks are on the list and which bucket each falls into, and the bucket sets the higher loss absorbency requirement. A bank that lowers its year-end indicators can, at the margin, drop a bucket and hold less capital.
The Committee’s final standard says it acted “based on evidence that some banks take steps to temporarily lower the values of certain indicators at year-end, which results in an underestimation of their systemic importance.” It repeats its earlier position that “window-dressing by banks is unacceptable” and says such behaviour “risks disrupting the operations of financial markets.” Year-end retreats from repo and derivatives markets by large dealers can drain liquidity at a time when other participants need it.
The proposal was first consulted on in March 2024. The final rules took more than two years.
Frequency depends on how systemic the bank is
The final standard sets a floor and a higher bar. All banks in the assessment must calculate stock indicators as the average of quarter-end values over the financial year. G-SIBs and near-G-SIBs, defined as banks with a score above 100 basis points in the previous year, must use higher frequencies for several items.
For those banks:
- total leverage exposure, intra-financial system assets and liabilities, and securities outstanding use monthly averages, with on-balance sheet SFT and derivative items averaged daily
- the notional amount of OTC derivatives is averaged daily
- trading and available-for-sale securities use monthly averages, with daily on a best-efforts basis
- cross-jurisdictional claims and liabilities and Level 3 assets stay on quarterly averages
National authorities may require higher frequencies for a bank or group of banks where they have concerns, or where a bank is expected to dip temporarily below the 100 basis point threshold. That discretion lets supervisors target a bank that hovers near a bucket boundary.
In doing so, the Committee has sought to strike a balance between addressing window dressing behaviour and avoiding undue reporting burden.
Basel Committee, Global systemically important banks: revised assessment framework to address window dressing, 16 October 2026
A transition starts in 2028
Banks will report higher-frequency data from 1 January 2029 for the assessment published in 2030. A transitional period begins on 1 January 2028, when banks will report both year-end values and, on a best-efforts basis, averaged values for the end-2028 exercise. Supervisors are expected to apply judgement where the two differ materially.
That dual reporting will show, for the first time on a consistent basis, how far each bank’s year-end figures depart from its average. Large gaps will be visible to supervisors a year before the averages count.
Daily averaging of derivatives and SFT positions is a substantial data task for banks whose systems were built to produce quarter-end and year-end snapshots. The 2030 date reflects that.
The threshold rises and EU banks get a consultation
The higher EUR 350 billion threshold, measured on the leverage ratio exposure measure at the previous year-end, takes effect from the end-2026 assessment exercise. Fewer banks will have to report and disclose G-SIB data as a result.
Separately, the Committee is consulting on writing into the standard its 2022 agreement on cross-border exposures within the European Banking Union. Under that agreement, EBU-headquartered G-SIBs receive a parallel score recognising 66% of the reduction that would follow from treating intra-EBU exposures as domestic, and any downward adjustment is limited to a single bucket. The revisions would apply immediately once finalised. Comments are due by 14 January 2027.
Basel III is close to complete
The G-SIB changes arrive as the core Basel III package nears full adoption. The Committee’s 5 October implementation update said that, as of 30 September, three quarters of its 27 member jurisdictions had published final Basel III rules, the revised credit risk, operational risk and output floor standards were effective in around 85% of them, and almost all had announced that banks must apply Basel III by April 2027 or earlier.
What to watch
- National transposition of the averaging rules ahead of the 2028 transition.
- Supervisors’ use of discretion to require higher frequencies for specific banks.
- Responses to the EBU consultation by 14 January 2027.
Primary sources
- BCBS, Basel Committee finalises measures to address window-dressing in the G-SIB framework and consults on G-SIB methodology review, 16 October 2026
- BCBS, Global systemically important banks: revised assessment framework to address window dressing (PDF), 16 October 2026
- BCBS, G-SIB methodology review, consultative document (PDF), 16 October 2026
- BCBS, Basel III applicable in almost all member jurisdictions by 2027, 5 October 2026
Related: Basel review grades Australia, Japan and Korea compliant on the leverage ratio
Photo (cropped): Michal Pleskowicz, CC BY-SA 4.0 via Wikimedia Commons
