An article by the OFR Deputy Director for Research and Analysis Stacey Schreft highlights that new data on the world’s largest banks show the increasing systemic importance of Asian banks. OFR also updated its online Global Systemically Important Bank (G-SIB) Scores Interactive Chart, along with figures showing the relative systemic importance of U.S. G-SIBs and 32 other U.S. banks that report the data. For these updates, OFR used the 2016 G-SIB data that BCBS released in November.
The data show that systemic importance scores of several Asian banks rose for the second year in a row. The scores of Bank of China and China Construction Bank rose enough to put them in a higher capital bucket because of their increased interconnectedness and complexity. As a result, those banks will face higher capital requirements. The systemic importance scores for three Japanese G-SIBs and for Dutch-based ING went up more than the score of the Bank of China. However, their capital requirements will not change because they did not move to different buckets.
The data reveal that U.S. banks’ systemic footprint still dominates the global totals. Eight U.S. banks are still considered global systemically important banks (G-SIBs). For U.S. non-G-SIB banks, the data continue to support the use of systemic importance metrics rather than asset size alone to set thresholds for heightened regulation. Additionally, a bank’s systemic importance is more desirable to use as a regulatory threshold than asset size alone, which could affect bank lending. The disconnect between size and systemic importance is particularly evident in the data on foreign banks’ U.S. operations. For example, the U.S. operations of Credit Suisse, Deutsche Bank, and Barclays have the three highest Basel Committee systemic importance scores of non-G-SIB U.S. banks. Yet, these firms rank lower—8th, 11th, and 10th—in asset size among non-G-SIB U.S. banks. Capital One is larger by assets than seven foreign banks’ U.S. operations with systemic importance scores higher than Capital One’s.
Keywords: Americas, US, Banking, G-SIB, Systemic Risk, OFR
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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