Template-Type: ReDIF-Paper 1.0
Author-Name: Luis Garcia
Author-X-Name-First: Luis
Author-X-Name-Last: Garcia
Author-Name: Ulf Lewrick
Author-X-Name-First: Ulf
Author-X-Name-Last: Lewrick
Author-Name: Taja Sečnik
Author-X-Name-First: Taja
Author-X-Name-Last: Sečnik
Title: Is window dressing by banks systemically important?
Abstract: We study banks' year-end window dressing in the European Union to assess how it affects the identification of global systemically important banks (G-SIBs) and the associated capital surcharges. We find that G-SIBs compress their balance sheet at year-end to an extent that they can reduce their surcharges or avoid G-SIB designation altogether. G-SIBs use several levers to adjust their balance sheets. Most notably, they compress intra-financial system assets and liabilities as well as their derivative books at year-end. Moreover, G-SIBs that are more tightly constrained by capital requirements window dress more than their peers. Our findings underscore the importance of supervisory judgement in the assessment of G-SIBs and call for greater use of average as opposed to point-in-time data to measure banks' systemic importance.
Length: 31 pages
Creation-Date: 2021-08
File-URL: https://www.bis.org/publ/work960.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work960.htm
File-Format: text/html
Number: 960
Keywords: systemically important bank, systemic risks, regulatory arbitrage, financial stability
Classification-JEL: G20, G21, G28
Handle: RePEc:bis:biswps:960