Bank Negara Issues Exposure Draft of Domestic Systematically Important Banks Framework

Bank Negara Malaysia (‘BNM’) is seeking feedback on the exposure draft of a policy document, Domestic Systematically Important Banks Framework, issued today.
 
The policy document applies to licensed banks, licensed investment banks, licensed Islamic banks (other than licensed international Islamic banks) and financial holding companies. The requirements set out in the policy document are to be complied with by the ‘apex entity’1 on a consolidated basis (including all subsidiaries except insurance and/or takaful subsidiaries).  BNM may in addition, also require a financial institution to comply with the policy requirements specified by BNM at the entity level.
 
The framework which forms part of Basel III regulatory reforms (together with the data submitted by the financial institutions in the reporting template set out in Appendix 4a of the policy document (‘D-SIB reporting template’)) will enable BNM to identify and manage risks posed by domestic systematically important banks (‘D-SIBs’) whose distress or failure may cause significant disruption and result in spillovers to the domestic financial system and the wider economy.
 
Institutions that are designated as D-SIBs will be subject to higher loss absorbency requirements to reduce the probability of such institutions’ failure.
 
The policy document sets out the assessment methodology to be applied, the basis of determining the higher loss absorbency requirement and the reporting requirements. An apex entity is required to submit the D-SIB reporting template annually within 60 days from the reporting position date. Although the policy document is an exposure draft, apex entities are required to submit a completed D-SIB reporting template for the period ending 31 December 2018 by 15 May 2019. 
 
When this policy document comes into effect, it will supersede the Domestic Systematically Important Banks Framework Survey issued on 10 October 2016.
 
The deadline for providing feedback on the questions posed in the proposed framework is 15 May 2019.
 
 

1 The ‘apex entity’ is a financial institution that is not a subsidiary of another financial institution.