The assessment, produced by the joint FSB-BCBS Macro-economic Assessment Group (MAG) in close collaboration with the International Monetary Fund, is summarised in the MAG's report, 'Assessing the macro-economic impact of higher loss absorbency for global systemically important banks'. The report provides an assessment of the transitional impact of the implementation of the stronger requirements set out in the Basel Committee's consultative document on additional G-SIB loss absorbency released in July.
The MAG assessment concludes that the transition to stronger capital standards on G-SIBs is likely to have at most a modest impact on aggregate output, while the benefits from reducing the risk of damaging financial crises will be substantial. The permanent benefits of the G-SIB framework arise from the reduced likelihood of systemic crises that can have long-lasting effects on the economy. The MAG estimated that the Basel III and G-SIB proposals combined contribute a permanent annual benefit of up to 2.5 per cent of GDP - many times the costs of the reforms in terms of temporarily slower annual growth.
As with any economic analysis, these results rest on a number of assumptions, including the role of G-SIBs in the financial system and how banks will go about meeting stronger requirements. The report reviews a number of alternative assumptions and concludes that they would not affect the overall conclusions. Many of these assumptions apply equally to the costs and benefits of higher capital levels.
Press release
© BIS - Bank for International Settlements
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