Title II — Scoring methodology for the assessment of the O-SIIs

The relevant authority should assess EU parent institutions, EU parent financial holding companies, EU parent mixed holding companies or institutions authorised in their jurisdiction (each a ‘relevant entity’) each year.

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The core set of criteria for the scoring of systemic importance should consist of:

• (a) size;
• (b) importance for the economy of the relevant Member State or the Union, capturing substitutability/financial institution infrastructure;
• (c) complexity — including the additional complexities from cross-border activity;
• (d) interconnectedness of the institution or (sub-)group with the financial system.

The four criteria each consist of one or more mandatory indicators as set out in Table 1 of Annex 1. All criteria should be weighted equally at a weight of 25%. The indicators within each criterion should be weighted equally relative to the other indicators within the respective criterion. Relevant authorities should endeavour to use harmonised definitions of these mandatory indicators across Member States, using the implementing technical standard on an EU-wide common supervisory reporting framework following the specifications in Table 2 of Annex 1. If indicator values in accordance with Table 2 of Annex 1 are not available due to the fact that relevant entities, which fall within the scope of Article 131 (1) of Directive 2013/36/EU but do not report in IFRS and to which FINREP requirements do not apply, have a share of total assets that is equal to or higher than 20.0%, relevant authorities should use appropriate proxies. In this case, relevant authorities should ensure that those proxies are properly explained and correlate to the greatest extent possible with the definitions in Table 2 of Annex 1.

Relevant authorities should calculate the score by

• (a) dividing the indicator value of each individual relevant entity by the aggregate amount of the respective indicator values summed across all institutions in the Member State (the ‘denominators’);
• (b) multiplying the resulting percentages by 10 000 to express the indicator scores in terms of basis points;
• (c) calculating the category score for each relevant entity by taking a simple average of the indicator scores in that category;
• (d) calculating the overall score for each relevant entity by taking a simple average of its four category scores.

Relevant authorities should designate relevant entities with a total score equal to or higher than 350 basis points as O-SIIs. Relevant authorities may raise this threshold up to 425 basis points as a maximum or decrease it to 275 basis points as a minimum to take into account the specificities of the Member State’s banking sector and the resulting statistical distribution of the scores, thereby ensuring the homogeneity of the group of O-SIIs designated in this way based on the O-SIIs' systemic importance.

Where the Member State’s banking system contains a large number of small institutions, relevant authorities may opt to exclude a relevant entity from the identification process if the relative size of this relevant entity measured by its total assets does not exceed 0.02%. When making this decision, the authorities should take into account the reporting burden associated with these relevant entities if they assess that the entities are unlikely to pose systemic threats to the domestic economy. If these entities are excluded from the identification process, the relevant authorities should avoid distortions of the scoring by estimating the indicator values for these relevant entities and including in the sample a virtual entity with the sum of the indicator values of these relevant entities when calculating the scores of the remaining relevant entities. The list of relevant entities should be reviewed each time the identification process is conducted.

Relevant authorities should include the indicator values of branches of institutions authorised in Member States or third countries in the denominators for the purpose of the scoring process, while ensuring that scores reflect the Member State’s banking sector adequately. Alternatively, relevant authorities should consider including in the sample a virtual entity with the estimated sum of the indicator values of these foreign branches when calculating the scores. In addition, relevant authorities should consider determining scores for third-country branches in accordance with the methodology set out in these guidelines, taking into account (i) the overall relevance of these third-country branches in the domestic banking system and (ii) data availability, comparability and appropriateness regarding third-country branches activity and designating them as O-SIIs, where relevant for the application of prudential requirements.

Relevant authorities may exempt investment firms from the application of the above methodology or use a different sample of institutions or an amended set of indicators, to the extent they consider the indicators in Annex 1 or the calculation of denominators based on all institutions to be inappropriate for investment firms. If relevant authorities include investment firms in the assessment, they may identify them as O-SIIs if their score as described in the preceding paragraphs exceeds 4.5 basis points.