Capital Buffer of Systemically Important Credit Institutions (O-SII Buffer)
Under Law 4261/2014 (Article 124), the Bank of Greece is also responsible for identifying, among credit institutions authorised in Greece, other systemically important institutions (O-SIIs), as opposed to those characterised as global systemically important institutions (G-SIIs).
The identification of O-SIIs is conducted on an annual basis to determine the appropriateness of applying the O-SII buffer. This buffer aims to limit the systemic impact of misaligned incentives with a view to reducing moral hazard, i.e. reducing excessive risk-taking in the belief that the credit institution is too big to fail.
The O-SII buffer consists of Common Equity Tier 1 (CET1) capital and its rate is set by the Bank of Greece at a level up to 2% of the total risk exposure amount and is reviewed at least once a year.
By Executive Committee Act 56/18.12.2015, the Bank of Greece adopted the guidelines of the European Banking Authority (EBA) in relation to the assessment of O-SIIs (EBA/GL/2014/10). These guidelines lay down harmonised criteria, indicators, scoring methodology and thresholds in order to achieve convergence in terms of identifying O-SIIs across Member States and making the assessment of O-SIIs comparable, comprehensible and transparent.
For the decisions of the Bank of Greece on the identification of O-SIIs and the setting of the O-SII buffer rate, click here.