Basel Committee On Banking Supervision Research Articles

Simulating Credit Loss Distributions: Empirical Versus the Vasicek Model

Because credit losses can be substantial, managing credit risk is a focus area of risk measurement and management. It is important for financial institutions to select credit risk models that accurately forecast losses. The Basel Committee on Banking Supervision (BCBS) chose the closed-form single risk factor Vasicek model for regulatory capital calculations. In this article, its forecast accuracy is compared with empirical loss distributions using simulated probabilities of default and losses given default. The effect of altering probabilities of default on asset correlations was analysed and how this affects credit portfolio loss distributions. The robustness of the Vasicek model against five different portfolios with unique compositions was explored: results highlight two key findings. Firstly, the Vasicek model is a good approximation of credit losses for a portfolio that does not contain dominating loans (it is, after all, based on the assumption of large-scale homogeneity). Secondly, the Vasicek model is a good approximation for expected loss (ELs) but lacks accuracy when determining extreme unexpected losses (ULs). Finally, credit capital requirements as a function of two variables are presented which reveals novel ways of viewing these values.

Estimating Value at Risk and Expected Shortfall: A Kalman Filter Approach

Value at Risk (VaR) estimates the maximum loss a portfolio may incur at a given confidence level over a specified time, while expected shortfall (ES) determines the probability weighted losses greater than VaR. VaR has recently been replaced by (but remains a crucial step in the computation of) ES by the Basel Committee on Banking Supervision (BCBS) as the primary metric for banks to forecast market risk and allocate the relevant amount of regulatory market risk capital. The aim of the study is to introduce a more accurate approach of measuring VaR and hence ES determined using loss forecast accuracy. VaR (hence ES) is unobservable and depends on subjective measures like volatility, more accurate (loss forecast) estimates of both are constantly sought. Modelling the volatility of asset returns as a stochastic process, so a Kalman filter (which distinguishes and isolates noise from data using Bayesian statistics and variance reduction) is used to estimate both market risk metrics. A variety of volatility estimates, including the Kalman filter's recursive approach, are used to measure VaR and ES. Loss forecast accuracy is then computed and compared. The Kalman filter produces the most accurate loss forecast estimates in periods of both calm and volatile markets. The Kalman filter provides the most accurate forecasts of future market risk losses compared with standard methods which results in more accurate provision of regulatory market risk capital.

The Impact of Capital Regulations on Bank Margins of ASEAN Banking Sector

Basel Committee on banking supervision (BCBS) has issued Basel which requires the banks to comply with the minimum capital requirement after the crisis. Nevertheless, whether the requirement imposes impact the banking sector which comprises a dual banking system, in a positive manner is still questionable. Given the higher capital costs from the strict capital requirements, banks are being forced to raise bank margins. This study investigates the effect of capital regulations on conventional and Islamic banks’ margins covering the ASEAN banking system from 2009 to 2017. The empirical analysis uses dynamic panel data frameworks to reveal several factors affecting bank margins. Overall, the results suggest that the total regulatory capital ratio helps reduce the margins of conventional banks but does not influence the margins of Islamic banks. As for the Tier-1 capital ratio, the variable increases the Islamic bank margins but does not significantly affect conventional bank margins. Based on the analysis results, regulators of conventional banks need to impose capital requirements as suggested by Basel III to reduce bank margins. Meanwhile, as for Islamic banks, the bank margins can be reduced if regulators can introduce a separate set of requirements tailored explicitly for Islamic banks.

Capital requirements – risk taking/stability nexus during the global financial crisis and COVID-19: international evidence of Islamic banks

Purpose This study aims to determine how Basel III capital requirements affect the stability of Islamic banks globally during the global financial crisis and the COVID-19 pandemic. Design/methodology/approach The secondary data for all Islamic banks worldwide from 2004 to 2021 is obtained from the FitchConnect database. The main technique was a two-step generalized method of moment (GMM) system, and the data were tested using pooled ordinary least squares, fixed effects and difference GMM models for robustness checks. Findings Regression results support the moral hazard hypothesis based on evidence that both the total capital ratio and the Tier 1 capital ratio have a statistically significant positive impact on the stability of Islamic banks globally. Furthermore, neither the global financial crisis of 2008–2009 nor COVID-19 (2020–2021) significantly impacted the stability of Islamic banks worldwide. The results are robust across alternative measures of stability, capital buffers, dummy variables and estimation techniques. According to the descriptive statistics, the number of Islamic banks that disclose their regulatory capital ratios to the public has increased over the study period, and the mean of total capital and Tier 1 ratios are considerably greater than what is required by Basel II and Basel III. Research limitations/implications Bankers, regulators and policymakers should benefit from the evidence on capital and risk management in Islamic banking according to Basel Committee on Banking Supervision (BCBS) and Islamic financial services board (IFSB) international standards in various jurisdictions. Originality/value This research builds on earlier studies that were both beneficial and instructive by exploring the relationship between BCBS and IFSB capital guidelines and the trustworthiness of Islamic banks in greater depth. This study uses numerous capital ratios, buffers and stability measures to provide an international context for research on Islamic banking. In addition, the database is up-to-date to include information about the COVID-19 pandemic aftereffects in the year 2021. This study also introduces the Basel membership of Islamic banks to provide context for countries still at the Basel II stage or are yet to begin implementing the Basel III international standard.

Calibrating the countercyclical capital buffer using AUROCs

AbstractWhile the setting of the countercyclical capital buffer (CCyB) is not an automatic decision, insights from indicators, such as the credit‐to‐GDP gap, are a starting point to inform the policy decision. This paper identifies an optimal rule to map the credit‐to‐GDP gap to the guide to set the CCyB. We use Italian data and follow two alternative procedures. First, we apply the criteria suggested by the Basel Committee on Banking Supervision (BCBS). Then we depart from the BCBS approach by proposing a procedure based on the maximization of the area under the receiver operating characteristic curve. We also explore whether the CCyB, had it been in place, would have mitigated the repercussions of the Great Financial Crisis on the Italian banking system. Based on a stylized exercise, the full release of the CCyB at the outbreak of the crisis would have freed around €40 billion of capital, a value close to the total amount of banks' credit provisions during the 3 following years.

Measurement and Calibration of Regulatory Credit Risk Asset Correlations

Vasicek’s asymptotic single risk factor (ASRF) model is employed by the Basel Committee on Banking Supervision (BCBS) in its internal ratings-based (IRB) approach for estimating credit losses and regulatory credit risk capital. This methodology requires estimates of asset correlations; these are prescribed by the BCBS. Practitioners are interested to know market-implied asset correlations since these influence economic capital and lending behavior. These may be backed out from ASRF loan loss distributions using ex post loan losses. Prescribed asset correlations have been neither updated nor recalibrated since their introduction in 2008 with the implementation of the Basel II accord. The market milieu has undergone significant alterations and adaptations since then; it is unlikely that these remain relevant. Loan loss data from a developed (US) and developing (South Africa) economy spanning at least two business cycles for each region were used to explore the relevance of the BCBS calibration. Results obtained from three alternative methodologies are compared with prescribed BCBS values, and the latter were found to be countercyclical to empirical loan loss experience, resulting in less punitive credit risk capital requirements than required in market crises and more punitive requirements than required in calm conditions.

Redefining the degree of industry greenness using input–output tables

Climate risk is a novel exposure that may rock the financial stability world-wide. For this reason the world banking regulation standards-setter – the Basel Committee on Banking Supervision (BCBS) – suggested considering pricing in the climate risk and adopting its relevant regulation. It listed input–output tables as one of the key tools to measure the climate riskiness of a borrower. However, most of the prior research considered carbon dioxide emissions when applying input–output tables. Same time there is a significant volume of research focusing on climate (or environmental) risk ratings. Nevertheless, both approaches might present only part of the larger climate-related financial risk implications. That is why, our research purpose is to develop full climate risk estimate by leveraging on the input–output tables and climate risk ratings. By doing so, we intend to demonstrate when the existing approaches yield sufficient information to make financial risk-related decision and when those should be improved by considering full climate risk justified in the current paper. The novelty of this work is the amalgamation of a known data source on environmental (climate) risk scores from Sustainalytics.com with the world input–output database (WIOD) for 2000–2014. The major finding of ours is that the greenness of industries is materially perturbed when considering WIOD-based full climate risk estimates as follows from an equivalent to the Leontief full production costs. We specifically find that aluminium as a commodity occurs much’browner’ from full climate risk perspective, than it seems from the marginal climate risk one. Hence, the steps taken by Australia to reduce aluminium production are necessary, but not sufficient. For the global welfare China has adopt a negative emission target (i.e., reduce more carbon dioxide, than is produced) to attain the objective of noticeable improvement in the global carbon footprint, particularly the one related to aluminium production. Our results are solicited by the Central Banks to accurately design the specialized lending facilities to truly green industries and projects.

The Generalised Extreme Value Distribution Approach to Comparing the Riskiness of BitCoin/US Dollar and South African Rand/US Dollar Returns

In this paper, the generalised extreme value distribution (GEVD) model is employed to estimate financial risk in the form of return levels and the value at risk (VaR) for the two exchange rates, BitCoin/US dollar (BTC/USD) and the South African rand/US dollar (ZAR/USD). The Basel Committee on Banking Supervision (BCBS) responsible for developing supervisory guidelines for banks and financial trading desks recommended that VaR be computed and reported. The maximum likelihood estimation (MLE) method is used to estimate the parameters of the GEVD. The estimated risk values are used to compare the riskiness of the two exchange rates and help both traders and investors to define their position in forex trading. This is to helping understanding the risk they are taking when they convert their savings/investments to BitCoin instead of the South African currency, the rand. The high extreme value index associated with the BTC/USD compared to the ZAR/USD implies that BitCoin is riskier than the rand. The BTC/USD has higher values of expected extreme/tail losses of 13.44%, 18.02%, and 23.41% at short (6 months), medium (12 months), and long (24 months) terms, compared to the ZAR/USD expected extreme/tail losses of 2.40%, 2.84%, and 3.28%, respectively. The computed VaR estimates for losses of USD 0.17, USD 0.22, and USD 0.38 per dollar invested in BTC/USD at 90%, 95%, and 99%, compared to ZAR/USD’s USD 0.03, USD 0.03, and USD 0.04 at the respective confidence levels, confirm the high risk associated with BitCoin. The conclusion drawn from this study is that BTC/USD is riskier than ZAR/USD, despite the rand being a developing country’s currency, hence perceived as being risky. The perception is that the rand is riskier than BitCoin and perceptions do influence exchange rates. Kupiec’s backtest results confirmed the model’s adequacy. These findings are helpful to investors, traders, and risk managers when deciding on trading positions for the two currencies.

Exploring Higher Capital Requirements in Nepal Under Basel III: A Qualitative Approach

This paper explored the impact of capital regulation on the banking industry in Nepal and sought to understand the reasons behind the requirements for higher capital in the country compared to global standards set by the Basel Committee on Banking Supervision (BCBS). The paper incorporated semi-structured interviews with experts from banks and the Nepal Rastra Bank (NRB) and employed thematic analysis to analyze the responses. The main factors driving higher capital requirements in Nepal were identified as risk management practices, financial stability, and the cost of financing, including the supervisory review process and the internal control systems of banks. The study found that the banking industry in Nepal lacks strong risk management policies and practices and that the regulator places a greater emphasis on ensuring the stability and resilience of banks rather than minimizing the economic cost of financing. Additionally, the corporate governance and internal control systems of banks in Nepal were found to be suboptimal.

The new supervisory outlier test (SOT) on net interest income (NII): empirical evidence from a sample of Italian banks

This paper contributes to prior literature and to the current debate concerning the prudential supervisory framework to measure interest rate risk in the banking book (IRRBB), which has been significantly changed on April 2016, when the Basel Committee on Banking Supervision (BCBS) published the latest update of its measurement standards. The consultation launched by the European Banking Authority (EBA) on December 2021, aiming at introducing the supervisory outlier test (SOT) on net interest income (NII), presents several issues and policy implications which could influence in the next future banks' asset and liability management strategies, their internal control systems, risk policies and procedures. By analyzing a sample of 28 Italian commercial banks at the end of 2021, representing more than 70% of Italian baking system’s total assets , we observe that the thresholds proposed by the EBA appear very strict and significantly depend on: i) the sample considered, ii) the lower bound applied to interest rates in the downward scenarios and iii) the current level of interest rates term structure. Our results suggest that the proposed values should be considered with caution as it seems that their potential impacts have not been thoroughly assessed. Further analyses are therefore necessary to guarantee greater robustness of the methodology used for the calibration of the thresholds, taking also into account a wider sample of banks and longer time series, as well as the correlation between the two approaches.

The non‐reversal of delegation in international standard‐setting in finance: The Basel Committee and the European Union

AbstractInternational non‐majoritarian institutions (NMIs) in finance have proliferated over the last decades. The Basel Committee on Banking Supervision (BCBS) is the main international NMI in finance and the European Union (EU) is one of its core jurisdictions. Despite the far‐reaching effects of international banking standards in the EU, especially the Basel accords, there has been limited politicization of delegation to the BCBS and no attempt to reverse it. Why? By taking a “soft” principal‐agent approach, this paper points out two explanatory factors: the composite nature of both the principal and the agent. It also identifies a pattern that can be generalized to other international NMIs in finance. Thus, following the initial delegation of international standard‐setting to the BCBS, this international NMI considerably increased its activities, going beyond what certain elected officials wanted; the response from elected officials was limited to the use of relatively weak ex‐ante and ex‐post controls, including delayed compliance.

The relationship between the risk of failure and the global systemic importance of banks: A multicriteria evaluation approach

Systemic risks constitute a major issue for financial stability, given the interconnectedness of financial institutions around the world. In this context, the identification of Global Systemically Important Banks (G-SIBs) is crucial, as it enables supervisors to spot potential sources of systemic risks at the global level and take mitigation actions. To this end, the Financial Stability Board (FSB), in consultation with the Basel Committee on Banking Supervision (BCBS), has built a methodology to identify G-SIBs. In this research, we employ a sample of banks over the years 2013–2018 and extend the FSB/BCBS methodology through the application of an outranking multicriteria decision aiding approach, combined with extensive sensitivity analysis based on simulations with respect to the criteria weights and the sample composition. Different schemes for aggregating the simulation results are examined in terms of their robustness. Moreover, we examine the relationship between the multicriteria evaluation for the global systemic importance of banks and their risk of failure. The results reveal that systemic importance is positively associated with their probability of default, thus indicating that additional special measures should be designed and implemented for monitoring the soundness of banks that have a major role in the global financial system.

Overview international best practices on customer due diligence and related anti-money laundering measures

PurposeThe anti-money laundering (AML) frameworks of many countries were generally influenced by the international best practices of money laundering that were first established in 1988 through the Basel Committee on Banking Supervision (BCBS). The general belief is that these international best practices are applicable in all jurisdictions, although most countries are still affected by money laundering. The international best practices are universal measures that were developed as a yardstick to control and curb money laundering globally. Nonetheless, international best practices for money laundering are not tailor-made for specific jurisdictions and/or countries. Therefore, it remains the duty of respective jurisdictions and/or countries to develop their own context-sensitive AML measures in accordance with international best practices. An overview of the AML international best practices that were developed and adopted by several countries are analysed in this paper. These include customer due diligence measures established by the BCBS, the financial action task force (FATF) standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.Design/methodology/approachThe article analyses the AML international best practices that were developed and adopted by several countries. These include customer due diligence measures established by the BCBS, the FATF standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.FindingsIt is hoped that policymakers and other relevant persons will use the recommendations provided in the paper to enhance the curbing of money laundering in financial institutions globally.Research limitations/implicationsThe paper does not provide empirical research.Practical implicationsThe study is useful to all policymakers, lawyers, law students and regulatory bodies globally.Social implicationsThe study seeks to curb money laundering in the economy and society globally.Originality/valueThe study is original research on the use of AML/counter financing of terrorism international best practices to curb money laundering activities globally.

Performance of Islamic and Conventional Banks: The Impact of Basel III

Purpose: To overcome the deficiencies of the Basel II and to respond the great depression of 2008, Basel III is designed to lower the default risk of banks. However, the unique business model and capital structure of Islamic banks is ignored at this point. A common banking regulation for two different types of banks may have a different impact on the profitability and cost efficiency of these banking types. In this regard, we address the question of the relative performance of both banking types in response to Basel III standards. Methodology: The study utilizes data of 79 banks, both Islamic and conventional, for the period of 2005 to 2019 from 10 different countries. For estimation, the study uses fixed-effect regression analysis. Findings: We find a positive impact of Basel III regulations on profitability and cost efficiency of the Islamic banks and a negative impact on conventional banks. The findings indicate that the favorable impact of Basel III on Islamic banks reduces the performance gap between both types of banks. Originality/Significance: This is perhaps the first paper which empirically explores the impact of Basel III regulations on the comparative performance of both types of banks. Policy Implications: The declining profitability and cost efficiency of conventional banks draw the attention of global and local banking regulators. Basel Committee on Banking Supervision (BCBS) and central banks of the countries with dual banking models should address this negative effect of the implementation of Basel III on conventional banks.

Determinants of Basel III Risk Disclosures: The Case of Gulf Cooperation Council Public Banks

Manuscript Type: Research paper Research aims: The purpose of this paper is to investigate and examine the determinants of risk disclosure practices under Basel 3, Pillar 3 (revised 2016 version) requirements of the top 50 listed banks in the Gulf Countries region (GCC). The study covers the period 2016-2019. Design/Methodology/Approach: The present study is based on a content analysis approach to allow the measurement of risk disclosures. Six risk disclosure categories were identified as the major sections regarding this particular type of reporting. The analysis covers both quantitative and qualitative data that had been hand collected from the annuals reports and Pillar 3 risk disclosures reports. From a regulatory perspective, the study refers to the most relevant international accounting standards, namely, Basel III Agreement Pillar 3 (2016 revised version), and IFRS 7. Research findings: It is expected that the GCC major banks, even though they must comply with the same risk disclosure regulation, will demonstrate specific disparities in their risk reporting. The results of the study suggest that Basel III risk reporting is significantly determined by size, leverage, cross listing, and government ownership. Theoretical contributions/Originality: The present study contributes to the literature by documenting the level of compliance of the top GCC banks with the recent BCBS risk disclosure requirements, and by providing empirical evidence regarding the quality of the released risk disclosures and its potential determinants. Another major contribution of the paper is the development of a self-constructed disclosure index that reflects the most recent Basel III disclosure regulations (Pillar 3, 2016 version). Practical implications: The findings of this study could be appreciated from different angles. From a regulatory perspective, this study might be insightful to GCC baking regulators in term of developing appropriate policies that will bring the banks to responsibly and professionally adopt an acceptable level of risk disclosure. At the global level, the findings could be insightful to the IASB concerning the degree of compliance of the banks in the region with IFRSs related to risk reporting. Thus, it can help the IASB consider institutional differences among countries when revising its pronouncements. Research limitations/Implications: The findings of the present study would be understood in light of some limitations. First, in the present study, we considered only the top 50 GCC listed banks, which could impede the generalisation of the results from the content analysis and the regression on the rest of the banks in the region. Second, we were interested in this research about the implementation of the new 2016 market discipline Pillar 3 disclosures requirement. Expanding the time frame of the study could reveal additional insights into risk disclosure practices. Keywords: Corporate Risk Disclosures Basel Committee on Banking Supervision (BCBS), Basel III, Pillar 3, Market Discipline, IFRS 7, Gulf Cooperation Council (GCC) JEL Classification: G21,G28,G32,G34,G38

Thematic analysis of the responsibilities of the board of directors in OECD, BCBS, and IFSB principles

At the center of this ongoing debate is the board of directors’ responsibilities, nevertheless, there are differences and similarities among the principles and guidelines of corporate governance worldwide when it comes to responsibilities of the board of directors. The interest in corporate governance and, specifically, the focus on bank governance have received increased attention from academics and policymakers after the global financial crisis of 2007–2009 (Pathan & Faff, 2013). Given the gap in the literature investigating these differences and similarities, this theoretical article aims to conduct a thematic analysis of the principles and guidelines of the Organisation for Economic Co-operation and Development (OECD), Basel Committee on Banking Supervision (BCBS), and Islamic Financial Services Board (IFSB), on board of directors’ responsibilities. This article provides a reference thematic analysis for policymakers, regulators, and researchers in developing national corporate governance principles and guidelines. The article highlights the shares themes between the principles of OECD, BCBS, and IFSB, and concludes with recommendations for future research in the area of the board of directors’ responsibilities.

Operational risk measurement based on multi-time scale dependence

Most existing studies simply use the annual data recommended by the Basel Committee on Banking Supervision (BCBS) to measure operational risk under dependence, and few are aware of the impact of the dependence at different time scales on measurement results. This paper proposes to measure the operational risk under dependence from the perspective of multi-time scales. Firstly, frequency dependencies are modeled based on the annual, semi-annual, and quarterly risk data to analyze the features of multi-time dependencies. Secondly, the loss distribution approach (LDA) is employed to calculate the operational risk under dependencies on the different time scales and discuss the impact of the time scale selection on operational risk measurement results systematically. The empirical study is based on the Chinese Operational Loss Database (COLD), which is one of the largest Chinese external operational risk databases. The results reveal that the dependencies of operational risk on different time scales indeed have distinct differences and significantly influence the operational risk measurements.

Վերահսկողական սթրես թեստավորումը որպես ՀՀ առևտրային բանկերի ֆինանսական ռիսկերը կառավա­րելու նոր գործիք/SUPERVISORY STRESS TESTING AS A NEW TOOL FOR CONTROLLING FINANCIAL RISKS OF RA COMMERCIAL BANKS

Nowadays, stress testing has emerged as a common tool for financial supervision and regulation with many countries undertaking related reforms. The International Financial Reporting Standard (IFRS) 9 has prescribed stress testing for banks and financial institutions as an exercise to determine the volatility in the expected credit loss in baseline and adverse scenarios such as significant deceleration in GDP growth or sharp increase in unemployment rates. The Basel Committee on Banking Supervision (BCBS) is finalising a new set of guidelines to replace the stress testing principles set in 2009. Using a concurrent stress testing approach will go a long way in strengthening the financial systems. Supervisory (concurrent) stress testing exercises today have many different goals, with some exercises having multiple objectives. The paper describes the features of supervisory stress testing, the study of macro and banking factors, their impact on the NPL ratio. The analysis will make it possible to introduce supervisory stress testing in Armenian banks and use it as an important tool for managing financial risks.

Facing the Challenges of Developing Fair Risk Scoring Models.

Algorithmic scoring methods are widely used in the finance industry for several decades in order to prevent risk and to automate and optimize decisions. Regulatory requirements as given by the Basel Committee on Banking Supervision (BCBS) or the EU data protection regulations have led to an increasing interest and research activity on understanding black box machine learning models by means of explainable machine learning. Even though this is a step into a right direction, such methods are not able to guarantee for a fair scoring as machine learning models are not necessarily unbiased and may discriminate with respect to certain subpopulations such as a particular race, gender, or sexual orientation—even if the variable itself is not used for modeling. This is also true for white box methods like logistic regression. In this study, a framework is presented that allows analyzing and developing models with regard to fairness. The proposed methodology is based on techniques of causal inference and some of the methods can be linked to methods from explainable machine learning. A definition of counterfactual fairness is given together with an algorithm that results in a fair scoring model. The concepts are illustrated by means of a transparent simulation and a popular real-world example, the German Credit data using traditional scorecard models based on logistic regression and weight of evidence variable pre-transform. In contrast to previous studies in the field for our study, a corrected version of the data is presented and used. With the help of the simulation, the trade-off between fairness and predictive accuracy is analyzed. The results indicate that it is possible to remove unfairness without a strong performance decrease unless the correlation of the discriminative attributes on the other predictor variables in the model is not too strong. In addition, the challenge in explaining the resulting scoring model and the associated fairness implications to users is discussed.

In the club: how and why central bankers created a hierarchy of sovereign borrowers, c. 1988–2007

From roughly 1988 to 2007, global banks faced strong regulatory incentives to lend to members of the OECD and those of the IMF’s General Arrangements to Borrow (GAB), along with disincentives to lend to countries that belonged to neither of these groups. The culprit was the Basel Accord, also known as Basel I, a piece of banking regulation designed by the Basel Committee on Banking Supervision (BCBS) to regulate global banks’ capital levels. Why did the BCBS create a ‘club’ of riskless sovereign borrowers, and why did it use OECD and GAB membership to do so? Relying on the archives of the BCBS, I first argue that the Basel Committee chose to design a club in response to European Community (EC) policies, which threatened a number of non-EC states on the Committee. Second, I argue that the BCBS chose to define the group through OECD membership because its members embodied a key set of criteria that it associated with creditworthiness. I conclude by outlining the implications of these findings for our understanding of the BCBS, as well as for our models of how central banks construct international hierarchies.