The Financial Stability Board has published the updated list of global systemically important banks
On 16 November 2018 the Financial Stability Board (FSB) published the updated list of global systemically important banks (G-SIBs) using data as of end-2017 and an assessment methodology proposed by the Basel Committee on Banking Supervision (BCBS).
Compared to the previous edition published in 2017, one bank (Groupe BPCE) has been added, whereas two banks (Nordea and Royal Bank of Scotland) have been removed from the list. Thus the overall number of G-SIBs has decreased from 30 to 29.
The FSB member authorities currently apply the following requirements to G-SIBs:
Higher capital buffer: The G-SIBs are allocated to buckets corresponding to a particular additional Tier 1 capital buffer compared to the one that national authorities require banks to hold in accordance with international standards. Buffers are expressed as a share of risk-weighted assets. Higher buckets (those with lower numbers) correspond to higher additional requirements and, consequently, contain relatively more important banks. Compared with the 2017 list, two G-SIBs have moved to a lower bucket: Bank of America has moved from bucket 3 to bucket 2 and China Construction Bank has moved from bucket 2 to bucket 1.
Total Loss-Absorbing Capacity (TLAC): National authorities require G-SIBs to meet the TLAC standard, along with regulatory capital requirements set out in the Basel III framework. The TLAC standard will be effective from 1 January 2019 for G-SIBs included in the 2015 list (provided that they remained in this status thereafter). From 1 January 2019 the minimum TLAC level should be 16% of risk-weighted assets, from 1 January 2022 – at least 18%.
Resolvability: This block of requirements includes systemic resolution planning and regular assessments of resolvability plans. The resolvability of each G-SIB is reviewed by senior regulators in the framework of a high-level FSB Resolvability Assessment Process (RAP).
Higher supervisory expectations: These include higher supervisory expectations for risk management functions, risk data aggregation capabilities, risk governance and internal controls.
The same day the BCBS published updated denominators used to calculate banks’ scores for allocation to buckets and the values of twelve underlying indicators for each bank from the list. Besides, it published the thresholds for scores used to allocate the G-SIBs to buckets and updated links to public financial disclosures of all relevant banks.
It is worth noting that out of 29 banks included in the list, eight are from the US, four are from France, three are British, and three are Japanese. Two banks from the list are registered in Switzerland. Canada, Spain, Germany, Italy and the Netherlands are represented by one bank each. Of the emerging economies, only China is included in the list (with four banks). At the same time, since 2011, when the FSB began compiling its annual list, it also included banks from Belgium and Finland, while Chinese banks were included later compared to financial institutions from other countries. Thus, on the one hand, the FSB contributes to reducing global risks in the financial sector by implementing measures aimed at effectively resolving the problem of “too big to fail” and avoiding a repetition of situations in the banking sector observed during the global financial crisis. On the other hand, the dominance of developed countries in the global banking system persists; accordingly, developing economies continue to face the risk of cross-border negative impact of crises initially provoked by other countries’ economic policies.
Author: Andrey Shelepov, Researcher of the Center for International Institutions Research (CIIR), Russian Presidential Academy of National Economy and Public Administration (RANEPA)