The Industrial and Commercial Bank of China Ltd. (ICBC) has been added to the list of globally systemically important banks (G-SIBs) by the Financial Stability Board (FSB), which means the Chinese bank faces stricter supervision and higher capital charges from January 2016.
The Swiss-based FSB, which coordinates global financial regulation, updates its list of globally systemically important banks and financial institutions (G-SIFIs) every November. The latest update of the list is based on end-2012 data and the list has now risen to 29 from 28.
In July the FSB also identified nine global systemically important insurers (G-SIIs), which together with the banks comprise the list of G-SIFIs. The update to the list of insurers takes place next November.
In addition to including ICBC for the first time as a G-SIB, the FSB will impose slightly less additional loss absorbency on Citigroup, Deutsche Bank and Bank of New York Mellon while France's Group Credit Agricole faces a slightly higher charge.
Systemically important banks are defined as those whose distress or disorderly failure would cause significant disruption to the global financial system and economic activity due to their size, complexity and interconnectedness. These banks are often referred to as "too-big-to-fail."
The FSB divides banks into buckets of additional loss absorbency that is required by regulators. These loss-absorbing requirements will be phased in by January 2016 and implemented by 2019.
As in 2012, the FSB does not have any banks in its so-called Bucket 5, which would impose a 3.5 percent additional equity loss absorbency as a percentage of risk-weighted assets.
But Bucket 4, in which banks face a 2.5 percent additional loss absorbency, now only comprises HSBC and JP Morgan Chase as Citigroup and Deutsche Bank have been moved to Bucket 3, which also includes Barclays and BNP Paribas. Banks in Bucket 3 face a 2.0 percent additional loss absorbency.
Bucket 2, which requires a 1.5 percent additional loss absorbency, comprises Bank of America, Credit Suisse, Goldman Sachs, Group Credit Agricole, Mitsubishi UFJ FG, Morgan Stanley, Royal Bank of Scotland and UBS.
Bucket 1 includes ICBC, Bank of China, Bank of New York Mellon, BBVA, Groupe BPCE, ING Bank, Mizuho FG, Nordea, Santander, Societe General, Standard Chartered, State Street, Sumitomo Mitsui FG, Unicredit Group and Wells Fargo. Banks in Bucket 1 face a 1.0 percent additional loss absorbency.