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As such, the policy document by the Basel Committee on Banking Supervision (2011, p. 7) has proposed the following reforms: “raising the required quality and quantity of capital in the banking system, improving risk coverage, introducing a leverage ratio to serve as a backstop to the risk-based regime, introducing capital conservation and countercyclical buffers as well as a global standard for liquidity risk.” These reforms are meant to improve the resilience of the banking sector during such trying times that are characterised by unprecedented changes in the global economy.

It has been noted that international banks are often affected by externalities in their operations of which they have little control over them. For instance, G-SIBs in different countries had little control over the impacts of the recent global financial crisis that witnessed the closure of some financial institution which could not sustain their operations. Main objective of the policy proposal The main objective of the policy proposal suggested by the Basel Committee (2011, p. . Therefore, in order for these policy frameworks to be effective, they should be developed from a global standpoint where different countries contribute towards the policy formulation which will guide the operations of all international financial institutions.

The Financial Stability Board (FSB) in consultation with different nations will help implement these policy changes which will be applied on a global level. Indicator-based measurement approach The indicator based measurement approach has been recommended by the Basel Committee and this method is based on various indicators that have been carefully chosen to identify the factors that often generate negative externalities that can affect on the global financial institutions in cases of global financial crisis which require a global solution rather than a national solution.

Both quantitative and qualitative methods will be used to complement each other in carrying out this measurement. The main advantage of this strategy is that it involves many dimensions of systemic importance which include the following: size, cross-jurisdictional activity, interconnectedness, substitutability and complexity. Size- the element of size of a banking institution is very important given that if it is a large institution, its failure is likely to impact negatively on the global economy.

Cross-jurisdictional activity- the activities of the bank in other countries can impact negatively on their economies in the event of failure or distress. Therefore, this indicator need to be established while there is still time so that it does not spill over to the economies of the other countries and the globe at large. Interconnectedness- the level of interconnectedness of the G-SIBs means that they can share the spoils in the