The Bank for International Settlements has published a Bulletin presenting a large language model-based screening procedure that compares bank capital instruments’ prospectuses with applicable rules and ranks potential divergences for supervisory review. Applied to Additional Tier 1 prospectuses from 10 European global systemically important banks, the procedure identified 79 candidate divergences that appeared in at least four of five model runs. These findings are screening results rather than determinations of regulatory breaches and require supervisory and legal assessment. The flagged differences were concentrated in loss-absorption provisions, particularly mechanical triggers and point-of-non-viability terms. Testing on anonymized Credit Suisse and Yes Bank documents also recovered differences that later featured in disputes or decisions over AT1 loss absorption. The approach could be extended to comparisons of national rules with international standards, but routine supervisory use would first require testing against expert-reviewed documents to assess material findings and missed divergences.
2026-08-26Bank for International Settlements
Bank for International Settlements develops LLM procedure to flag capital rule divergences in AT1 prospectuses
The Bank for International Settlements has developed an LLM-based procedure to rank potential differences between AT1 prospectuses and capital rules for expert review. It identified 79 recurrent candidate divergences across 10 European global systemically important banks and recovered differences that later mattered in the Credit Suisse and Yes Bank cases. Further expert-based testing would be needed before routine supervisory use.