Chinese banks have jumped up international regulators’ rankings of the banks which are most crucial to the global financial system as Citigroup and BNP Paribas fell down the list.
The FSB sets extra capital requirements for banks whose size and complexity means a collapse would endanger the global financial system based on which bucket they fall into.
The rise of Chinese banks underlines the growing importance of the world’s second largest economy to the financial system. While China has long been a vital partner in trade in manufactured goods, its growing financial heft increasingly makes it a crucial player in financial services as well.
The list of G-SIBs was introduced by regulators in 2011, in a belated response to the collapse of US bank Lehman Brothers in 2008, the single event which triggered the global financial crisis. The Basel-based FSB is chaired by Mark Carney, governor of the Bank of England.
JP Morgan Chase is now the sole occupant of the fourth, penultimate bucket, meaning it must hold 2.5 per cent extra capital and making it the most important bank to the healthy functioning of the global financial system. Citi’s capital requirements will drop to two per cent after it fell to the third tier.
Meanwhile, France’s BNP Paribas dropped into the second tier and Switzerland’s Credit Suisse dropped into the first bucket.
Royal Bank of Canada was the only new addition to the list of the 30 banks of systemic importance, while France’s Groupe BCPE is no longer judged to be a potential threat to global financial stability.
There was no change in the requirements for the UK's four systemically important lenders: HSBC, Barclays; Royal Bank of Scotland and Standard Chartered.
The 30 systemically important banks
Bucket (capital buffer): Bank
5 (3.5%): None
4 (2.5%): JP Morgan Chase
3 (2%): Bank of America; Citigroup; Deutsche Bank; HSBC
2 (1.5%): Bank of China; Barclays; BNP Paribas; China Construction Bank; Goldman Sachs; Industrial and Commercial Bank of China Limited; Mitsubishi UFJ FG; Wells Fargo
1 (1%): Agricultural Bank of China; Bank of New York Mellon; Credit Suisse; Groupe Credit Agricole; ING Bank; Mizuho FG; Morgan Stanley; Nordea; Royal Bank of Canada; Royal Bank of Scotland; Santander; Societe Generale; Standard Chartered; State Street; Sumitomo Mitsui FG; UBS; Unicredit Group