The Governing Council of the European Central Bank (ECB) is releasing the following statement after the meeting of its Macroprudential Forum on 27 November 2024.

The ECB will enhance the floor methodology used to assess capital buffers for other systemically important institutions (O-SIIs) so that it also takes into account the systemic importance of O-SIIs for the banking union as a whole. In December 2022 the Governing Council announced that the ECB will continue to promote the development of a common EU methodology for O-SII buffers. This will counter unwarranted heterogeneity in the way buffers are set and ensure more consistency in the required loss-absorption capacity of O-SIIs.1 The existing ECB floor methodology, which has been in place since 2016, only takes a national perspective. The enhanced floor methodology will also include a banking union perspective for assessing the systemic importance of all O-SIIs for the banking union as a whole.

The enhanced floor methodology will lead to a more consistent treatment of O SIIs across Member States participating in the banking union. The enhanced ECB O-SII floor methodology will contribute to financial stability within the banking union, in line with the ECB's mandate under Article 1 of the SSM Regulation,2 by assessing the systemic importance of all O-SIIs for the banking union as a whole. The reduction of the unwarranted heterogeneity in buffer levels for the most systemically important banks in the banking union will make the banking system of the banking union more resilient to shocks and will increase the level playing field.

Moreover, the enhanced ECB methodology will contribute to deepening financial integration by reducing the current disparity between capital requirements for domestic and cross-border activities within the banking union. This reflects the significant progress made in the banking union. Since the inception of the ECB’s O-SII floor methodology in 2016, there has been further harmonisation of regulation, supervision and resolution (although some elements of the banking union are not yet complete). This harmonisation mitigates the systemic risk arising from cross-border exposures within the banking union. Accordingly, the Basel Committee for Banking Supervision recognised in 2022 that this progress in the banking union could be embedded in the assessment framework for global systemically important banks (G-SIBs).3 Recognition of this progress is therefore also warranted in the framework used to assess the importance of all O-SIIs for the banking union as a whole. This is done by considering cross-border exposures within the banking union to be partly equivalent to domestic exposures.

The ECB will ensure that, for each O-SII at the highest level of consolidation within the banking union, the O-SII buffer should be no less than the higher of the minimum buffer rates implied by the banking union perspective and the national perspective. In line with the EU legal framework, the ECB’s O-SII floor implied by the national perspective is retained without changes. The enhancements to the floor methodology focus on those institutions that are most systemically important from a banking union perspective. For most O-SIIs the buffer floor implied by the national perspective is higher than that implied by the banking union perspective. The enhanced ECB O-SII methodology will be applied in line with the ECB's responsibilities under Article 5 of the SSM Regulation to assess O-SII buffer levels.

The ECB will use the enhanced floor methodology to assess O-SII buffers notified by the national authorities, starting from 1 January 2025. The framework will be capital neutral in 2025 and 2026. After that, the banking union floor will be increased in two increments and, as a result, the enhanced methodology will be fully phased in as of 1 January 2028 (see Annex). The ECB will monitor the application of the enhanced floor methodology, taking into consideration developments in the banking union and in European financial regulation.

Independently of these enhancements to the ECB floor methodology, the ECB will continue to promote the development of a common EU methodology for setting O-SII buffers. The ECB, reiterating the suggestion it made in the response to the European Commission's call for advice on the review of the EU macroprudential framework, supports mandating the European Banking Authority (EBA), in consultation with the European Systemic Risk Board, to issue guidelines on a revised methodology for O-SII identification and buffer calibration.5 While promoting a common EU methodology, such guidelines would need to be flexible to ensure that national specificities, institutional and structural developments, and insights gained since the EBA published the current guidelines in 2014 can be reflected appropriately.