O-SII Buffer

The O-SII buffer is a macroprudential policy instrument aiming at reducing moral hazard and strengthening the resilience of systemically important credit institutions.

In this context, moral hazard arises when a institution expects not to be let to fail given its systemic importance (“too big to fail”). An O-SII buffer limits excessive risk-taking by a systemically important institution through higher capital requirements, thus reducing moral hazard. Moreover, it cushions the systemic impact of misaligned incentives by strengthening the systemically important institution’s capital buffer to absorb potential losses and thus reduces contagion risk.

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 3% of the total risk exposure amount on a consolidated, sub-consolidated or individual basis, as applicable, and is reviewed at least once a year. An O-SII buffer rate higher than 3% is subject to European Commission authorisation.

The Bank of Greece is also responsible for identifying, among institutions authorised in Greece, other systemically important institutions (O-SIIs). O-SIIs are identified on an annual basis so as to consider the application of an O-SII buffer. It should be noted that there are no global systemically important institutions (G-SIIs) in Greece.

The Bank of Greece has adopted the European Banking Authority (EBA) guidelines in relation to the assessment of O-SIIs (EBA/GL/2014/10). These guidelines lay down harmonised criteria, indicators, scoring methodology and thresholds, towards achieving convergence of national O-SII identification procedures, thus ensuring comparability, clarity and transparency in the assessment of systemically important institutions at EU level.

The methodology applied by the Bank of Greece in order identify O-SIIs in Greece and set the O-SII buffer, adopted by means of Executive Committee Act 221/1/17.10.2023, takes into account the specificities of the domestic banking sector as well as the revised European Central Bank (ECB) floor methodology for the calibration of the O-SII buffer rate as set out in the ECB Governing Council statement on macroprudential policies dated 28.10.2022.

In accordance with this methodology, a score is calculated for each institution indicating its systemic importance based on specific criteria that relate to size, importance for the economy, complexity and interconnectedness of the institution with the financial system. These four criteria each consist of one or more mandatory indicators which are used as a minimum in the calculation of each institution’s score, expressed in basis points (bps). The 350 bps has been set as an indicative threshold. Institutions with a score equal to or higher than the threshold are identified as O-SIIs. The table below shows the mandatory indicators and relevant weights used for the scoring of O-SIIs in Greece.

Table: Mandatory indicators for the scoring of O-SIIs in Greece

Criterion

Indicators

Weight

Size

Total assets

25%

 

 

 Importance

Value of domestic payment transactions

8.33%

Private sector deposits from depositors in the EU

8.33%

Private sector loans to recipients in the EU

8.33%


Complexity/ Cross-border activity

Value of OTC derivatives (notional)

8.33%

Cross-jurisdictional liabilities

8.33%

Cross-jurisdictional claims

8.33%

Interconnectedness

Intra-financial system liabilities

8.33%

Intra-financial system assets

8.33%

Debt securities outstanding

8.33%

Source: Guidelines on the criteria to determine the conditions of application of Article 131(3) of Directive 2013/36/EU (CRD) in relation to the assessment of other systemically important institutions (O-SIIs).

Since 1 January 2016, the Bank of Greece has applied the above methodology and the following institutions have been identified as O-SIIs: National Bank of Greece S.A., Piraeus Financial Holdings S.A., Alpha Services and Holdings S.A., and Eurobank Ergasias Services and Holdings S.A. The Bank of Greece decided to set the O-SII buffer at 0% for all O-SIIs for 2016-2018, 0.25% for 2019, 0.50% for 2020 and 2021, and 0.75% for 2022 and 1.00% for 2023.

For 2024 the Bank of Greece set the O-SII buffer rate as follows:

- at 1.25% for Eurobank Ergasias Services and Holdings S.A. at consolidated level, and

- at 1.00% for the following O-SIIs:

   - Alpha Bank S.A. at solo level,

   - Alpha Services and Holdings S.A. at consolidated level,

   - Eurobank S.A. at solo level,

   - National Bank of Greece S.A. at solo and consolidated level,

   - Piraeus Bank S.A. at solo level, and

   - Piraeus Financial Holdings S.A. at consolidated level.


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