Global Systemically Important Banks
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A summary of what Globally Systemically Important Banks are and which metrics are used to identify these banks.
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Glossary
G-SIBsTranscript
Global systemically important banks or G-Sibs are banks that if they were to fail, would have potentially disastrous consequences for the world economy. As such, these banks are held to a higher standard than other banks and are required by regulators to hold additional capital in addition to the General Basel rules, to protect the stability of the global financial system. In the US in order to identify the G-sibs, once a year, US regulators will score major banks across five categories. These scores are used to assign banks to one of five buckets. These buckets dictate how much additional CET1 the bank is required to hold. The categories are, size. Large banks are harder to replace quickly and therefore would cause more disruption to financial markets and damage to confidence in those markets.
Cross jurisdictional activity.
This indicator captures a bank's global footprint and measures a bank's activities outside its home jurisdiction. Interconnectedness. A bank encountering financial distress will increase the likelihood of distress at other institutions where the number of contractual obligations between these firms is high. Substitutability. The greater a bank's role in a business line, or as a service provider in underlying market infrastructure, the larger the disruption will be if it fails. And complexity. The more complex a bank is, the greater the costs and time needed to resolve the bank if it failed. As of 2023, US banks in bucket five are required to hold an additional three and a half percent of their RWAs as CET1 capital. Those in bucket one are only required to hold an additional 1% of CET1 capital. The number of G-Sibs identified by regulators each year is about 30. As of November, 2023, these were the banks in the three buckets with the highest additional capital requirements. For US banks, this is JP Morgan, Goldman Sachs, Citi, and Bank of America. In Europe, BNP, Paraba, Barclays, Deutsche Bank, HSBC and UBS and in Asia Agricultural Bank of China. Bank of China, China Construction Bank, ICBC and MUFG. None. Currently sit in bucket five.