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As part of the G20's initiative to strengthen the oversight and regulation of the shadow banking system, the guidelines help mitigate the risk that potential distress faced by shadow banking entities spills over to banks.
The step-in risk guidelines build upon two consultation processes carried out by the Committee in December 2015 and March 2017. The guidelines aim to mitigate significant step-in risk through a supervisory process built on reporting. Specifically, banks will be required to assess their step-in risk based on a wide range of indicators and a self-defined but transparent materiality policy. The guidelines do not prescribe any automatic Pillar 1 liquidity or capital charge, but rather rely on the application of existing prudential measures available to mitigate significant step-in risk.
The guidelines are expected to be implemented in member jurisdictions by 2020.