Industrial & Commercial Bank of China was added to the list of too-big-to-fail banks as global regulators revised the roster of lenders that must hold extra capital to prevent another financial crisis.
Banks whose capital buffers were cut from last year included Citigroup, Deutsche Bank and Bank of New York Mellon, while Credit Agricole Group was told to add more.
Regulators are ranking financial firms by their potential to cause a global meltdown and demanding bigger financial cushions from them to avert any repeat of the 2008 credit freeze. While ICBC is the world’s most profitable lender, bad loans are rising at China’s top banks after a five-year credit spree. As for Western companies, Pri de Silva, an analyst at CreditSights, said he’s surprised by some of the cuts.
Are these institutions 'less interconnected than they were a year ago ? That doesn’t seem likely', said the New York-based de Silva. Some lenders may have gone 'to the powers that be and made the case that they should be viewed from a different lens', he said.
The revised list leaves only New York-based JPMorganChase, the largest U.S. bank by assets, and London-based HSBC, Europe’s biggest by market value, in line to face the top 2.5% surcharge. Citigroup and Frankfurt-based Deutsche Bank must meet a 2% target after previously being in the top category. Beijing-based ICBC’s surcharge is 1%, the same as Bank of China, which was already included last year.
To access the complete Bloomberg article hit the link below: