Global Systemically Important Institutions Buffer (G-SII Buffer)

The Capital Requirements Directive (CRD) (2013/36/EU) provides additional capital requirements for systemically important banks, i.e. banks that may pose systemic risks to the global financial system given their size, market importance and global interconnectedness. The global systemically important institutions (G-SII) buffer is a mandatory capital surcharge built up of Common Equity Tier 1 capital and applied at the consolidated level of the identified banking groups. The main aim of the measure is to increase the resilience of the banking sector at the global level by compensating for the higher risk that G-SIIs represent and the potential impact of their failure. The capital surcharge may vary between 1% and 3.5% depending on the degree of systemic importance of the bank. It is being gradually phased-in from 1 January 2016 until 1 January 2019. The legal provisions that provide for the identification of G-SIIs and the application of the buffer requirement are contained in Article 131 of the CRD IV which have been transposed into national law through Articles 59-3 and 59-8 of the Law of 5 April 1993 on the financial sector (LFS). The CSSF, as designated authority, is in charge of identifying G-SIIs in Luxembourg. It takes the decisions after consultation with the Banque centrale du Luxembourg (BcL) and by taking into account the opinion of the Comité du Risque Systémique (CdRS). There is no bank established in Luxembourg identified as a G-SII.