Daily Management Review

List of Globally Systemic Banks Topped By Citi and JP Morgan


11/21/2016




List of Globally Systemic Banks Topped By Citi and JP Morgan
Replacing HSBC and denoting that the U.S. bank will have to hold extra capital from 2019 to help preserve financial stability, Citi has joined JPMorgan at the top of global regulators' list of systemically important banks.
 
The top banks should hold extra capital, according to the level of risk they present as their size and complexity could mean a collapse could wreak havoc in markets, the group of 20 economies (G20) had agreed after the 2007-09 financial crisis.
 
Bonds from 2019 that can be written down to help replenish capital that is burned through in a crisis would also be started to be held by members of the list of 30 lenders.
 
 Citi has replaced HSBC in the top "bucket" facing a 2.5 percent capital surcharge on top of global minimum requirements in the annual update of rankings published on Monday by the G20's Financial Stability Board (FSB).
 
There has been no addition or deletion of new or old banks in the list of top 30 this year.
 
Due to pressure from regulators and markets to dispel any doubts about their resilience, lenders on the list typically already meet or exceed the amount of capital they must hold.
 
With a surcharge of 2 percent, HSBC joins BNP Paribas and Deutsche Bank in the next category down, with a surcharge of 2 percent while the Bank of America rose a category to join them.
 
Joining the category of the 1.5 percent surcharge group was Barclays which dropped a category. There was a rise in category by Industrial and Commercial Bank of China and Wells Fargo to join the UK bank.
 
Morgan Stanley fell a category to the 1 percent surcharge group.
 
A higher leverage ratio for the 30 lenders is also due to be agreed upon by the FSB.
The ratio has been set at a minimum of 3 percent for all other banks across the world and is a broad measure of capital to non-risk-weighted assets.
 
One the question of whether the 30 should be subject to the same leverage ratio "surcharge" or whether it too should adopt a "bucket" approach, the FSB has yet to make a conclusive decision.
 
Remaining unchanged since last years was the list of nine globally systemically important insurers which was also updated by the watchdog.
 
There will be a requirement to comply with tougher "loss absorbency" requirements from January 2019 for the insurers still on the list in 2017. Aegon, Allianz, AIG, Aviva, Axa, MetLife, Ping An, Prudential Financial, and Prudential comprise the list.
 
Reinsurers, a category still being considered for inclusion, have found no mention on the FSB's latest list.
 
When Global insurance regulators decide if they are globally systemic, rather than just focusing on size and global reach, they have said they may take into account the activities of insurers.
 
The Financial Stability Oversight Council, made up of the heads of U.S. financial regulators, have designated MetLife, the biggest U.S. life insurer, as systemically important.
 
The company is fighting the U.S. designation in the country's courts.
 
(Source:www.reuetrs.com) 






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