FSB Publishes List of Global Systematically Important Banks

The Financial Stability Board (FSB) has published this year’s list of global systemically important banks (G-SIBs), which includes the addition of Industrial and Commercial Bank of China.

G-SIBs are a group of 29 banks that face additional regulation “based on the cross-border negative externalities created by systemically important banks, which current regulatory policies do not fully address,” said the Basel Committee in a July methodology report, which the FSB used to determine its own list. These banks have additional disclosure requirements and a higher loss absorbency ratio, which differs based on what the perceived effects would be should a bank fail, due to its systematic importance. The loss absorbency ratio is a measure of the bank’s common equity as a percentage of risk-weighted assets.

“The aim of the higher loss absorbency requirement, as set out in the report endorsed by the G20 at its Seoul Summit in November 2010, is to ensure that G-SIFIs (global systematically important financial institutions) have a higher share of their balance sheets funded by instruments which increase the resilience of the institution as a going-concern. Taking into account this going-concern objective, the Committee concluded that G-SIBs be required to meet their higher loss absorbency requirement with Common Equity Tier 1 capital only,” said the report. 

This year, HSBC and J.P. Morgan have the highest additional loss absorbency ratio of 2.5%, whereas last year Citigroup and Deutsche Bank were also in that group. Those two banks have dropped down to a 2% additional requirement, joining Barclays and BNP Paribas.

The 1.5% group includes Bank of America, Credit Suisse, Goldman Sachs, Group Crédit Agricole, Mitsubishi UFJ FG, Morgan Stanley, Royal Bank of Scotland and UBS. The lowest group, 1%, is also the largest, with Bank of China, BNY Mellon, BBVA, BPCE, Industrial and Commercial Bank of China, ING, Mizuho, Nordea, Santander, Société Générale, Standard Chartered, State Street, Sumitomo Mitsui, Unicredit and Wells Fargo all included.