Who would be a G-SIB?


Global-Systemically Important Banks are particularly under the regulatory microscope.

It is an open secret in most economies that politicians are not exactly enamoured of the larger banks, particularly those which offer both commercial and “casino” banking.

It has been the mission of the G20 Financial Stability Board (FSB) to ensure that the largest financial institutions – G-SIFIs, not just banks but insurance companies and asset managers (remember AIG?) – do not endanger the global economy as they are Too Big To Fail (TBTF) and that their global activities can be properly supervised as a whole – co-ordinating the roles of both domestic and remote supervisors.

The FSB has designated 30 banks as G-SIBs.

G-SIBs as of November 2014 allocated to buckets corresponding to required level of additional loss absorbency    



G-SIBs in alphabetical order within each bucket

Bucket 5 (3.5%) None
Bucket 4 (2.5%) HSBC, JP Morgan Chase
Bucket 3 (2.0%) Barclays, BNP Paribas, Citigroup, Deutsche Bank
Bucket 2   (1.5%) Bank of America, Credit Suisse , Goldman Sachs,

Mitsubishi UFJ FG, Morgan Stanley, Royal Bank of Scotland.

Bucket 1 (1%) Bank of China, Bank of New York Mellon, BBVA,

Groupe BPCE, Group Credit Agricole, Industrial and Commercial Bank of China Limited, ING Bank,

Mizuho FG, Nordea, Santander, Société Générale , Standard Chartered , State Street, Sumitomo Mitsui, UBS, Unicredit Group, Wells Fargo


The main result is to require G-SIBs to reserve additional capital as Total Loss Absorbing Capacity (TLAC) to be put in place by January 2019. The measures are:

  • A minimum TLAC level of 16-20% of risk-weighted assets (“RWAs”) – which is double the current Basel III capital level; ?
  • A minimum of a 6% leverage ratio – which is twice the Basel III leverage requirement;
  • The TLAC to be disposed across a G-SIB’s international entities.

This has been moved from being a consultative proposal to become a set of standards, as announced at the September 2015 FSB board meeting in London.? This is indeed a big hammer, albeit to hit a big nail. But this is not the only time that G-SIBs are singled out for special treatment.

Risk Data Aggregation

The Principles for Effective Risk Data Aggregation and Risk Reporting, published by the BIS (BCBS 239) in 2013, require G-SIBs – national supervisors may determine that Domestic-Systemically Important Banks (D-SIBs) have to apply the same standards – to build a global and intraday risk reporting infrastructure. The difficulty of achieving these standards is covered elsewhere, but an indicator might be the 3,000 staff that JPMC believes to be necessary to define, build and run this “fortress” infrastructure.

This includes the requirement for G-SIBs to monitor intraday liquidity requirement, as is evidenced by the concentration of the Fed on the intraday settlement risks between the major US institutions (BAML, Citi, JPMC, BONY Mellon) particularly in the daily activity of tri-party repo settlement.

This is combined with BCBS 283, the requirement that large exposures should be limited, to large counter-parties which may be single or inter-dependent institutions. Again, G-SIBs get special treatment.

“The large exposure standard….includes a general limit applied to all of a bank’s exposures to a single counterparty, which is set at 25% of a bank’s Tier 1 capital. …… A tighter limit will apply to exposures between banks that have been designated as global systemically important banks (G-SIBs). This limit has been set at 15% of Tier 1 capital.”

When this is linked to other national regulations, such as in the UK, where banks are being forced to ring-fence their high street businesses from their “casino” investment banking arms, the extent of regulation and organisational change looks more than a little demanding for the large banks.

Liquidity Strategy

Ultimately, the combined effects of increased capital and liquidity requirements, reserving funds in low-return high quality assets, and tighter leverage ratios have made these large banks less profitable, at least in their existing business models.

All of the above is forcing large banks, inter alia, to:

  • Enhance their intraday liquidity management capabilities to reduce their and their customers’ use of scarce resource;
  • Review their corporate and FI services and products to increase their liquidity stocks;
  • Concentrate upon corporate relationships which yield both greater return and become better assets. The interest of both corporates and banks is common as seldom before;
  • Shave off those business activities which offer less attractive return on capital.

If the regulatory emphasis on the large banks is currently heavy, there is still profit to be made be re-aligning the business to meet those regulatory concerns. And the FSB has emphasised that the introduction of TLAC is the last of the major reforms.


The topics in this note are set out in greater detail in Newsletter 18 on this site, for which you may register.