Basel III International Banking Framework RBC40: Meet the higher loss absorbency requirement for systemically important banks in CET1

Global systemically important banks must meet their higher loss absorbency requirement with CET1 only; it operates as an extension of the capital conservation buffer divided into four equal bands (RBC40.1 to 40.2). A G-SIB that breaches it must agree a capital remediation plan with the supervisor and, until it has returned to compliance, is subject to the conservation buffer's payout limits and any other supervisory arrangements (RBC40.3). G-SIBs are bucketed on their systemic importance scores: 130 to 229 basis points 1.0% of RWA, 230 to 329 1.5%, 330 to 429 2.0%, 430 to 529 2.5% and an initially empty 530 to 629 bucket at 3.5%; if the top bucket becomes populated a further bucket is added with a requirement 1 percentage point higher (RBC40.4 to 40.5). A G-SIB that moves to a higher bucket has 12 months to meet the higher requirement before the retention mechanism applies, while a fall in score releases the requirement immediately unless the national authority delays the release (RBC40.6). Domestic systemically important banks identified by national authorities under the D-SIB principles of SCO50 are subject to a higher loss absorbency requirement set by those authorities and met fully with CET1 (RBC40.7 onwards).