FSB Publishes List Of Global SIFIs, Confirms Capital Surcharge

The enforcement agency for financial stability of the Group of 20 industrial and developing nations Friday published the long-awaited list of those banks it will force to hold more capital because of their importance to the global financial system.

The list of Globally Systemically Important Financial Institutions is very much as had been expected, with 17 European banks, eight U.S. ones, three Japanese and one Chinese on it. Two large European banks, Spain's Banco Bilbao Vizcaria Argentaria SA (BBVA.MC) and Italy's Intesa Sanpaolo SpA (ISNPY), are conspicuous by their absence, due largely to their concentration of activities in their home markets.

The banks named Friday by the FSB have until the end of next year to lay out in detail how their businesses should be unwound if they collapse. From 2016, they will also have to hold more capital than other banks "in order to reflect the greater cost to the system of their failure." As such, by 2019 at the latest, the G-SIFIs will have to have a core tier 1 capital ratio up to 3.5 percentage points higher than banks that aren't systemically relevant.

The FSB foresees five "buckets", requiring extra capital of 1%, 1.5%, 2%, 2.5% and 3.5%. The more important the SIFI, the higher the surcharge it will have to pay. FSB chairman Mario Draghi said in Cannes Friday that it is still too early to say which "bucket" the individual banks will be put in, but the 3.5% "bucket" will be left empty to start with.

The banks have argued that the surcharges will restrict their ability to lend to the economy, as well as distorting competition with their rivals. The regulators largely dismissed those concerns in confirming the bulk of their original recommendations Friday.

"Complete and globally consistent implementation of these measures will be essential for a safer and sounder banking system and will contribute to broader financial system stability," Stefan Ingves, chairman of the Basel Committee on Banking Supervision, said in an e-mailed press statement.

The Basel Committee has stressed that the capital surcharges are intended as minimum requirements, and has left national regulators free to impose higher ones.

The FSB said the list of G-SIFIs would be updated in November every year, while the methodology used to define them would be reviewed every three years.

As reported, the FSB and the Basel Committee of Banking Supervision drew up its list of G-SIFIs on the basis of five criteria: their absolute size, their complexity, the extent of their cross-border activities and the degree to which they are interconnected with the rest of the financial system.

The regulators also considered to what extent the banks in question provided services that couldn't be quickly or adequately replaced by other banks if they failed.

The full list is as follows:

U.S.: Bank of America (BAC), Bank of New York Mellon , Citigroup (C), Goldman Sachs (GS), J.P. Morgan (JPM), Morgan Stanley, State Street (STT) and Wells Fargo (WFC).

U.K.: Royal Bank of Scotland PLC (RBS), Lloyds Banking Group PLC (LLOY.LN), Barclays PLC (BCS), HSBC Holdings PLC (HBC);

France: Credit Agricole SA (ACA.FR), BNP Paribas SA (BNP.FR), Banque Populaire, Societe Generale SA (GLE.FR)

Germany: Deutsche Bank AG (DBK.XE), Commerzbank AG (CBK.XE)

Italy: Unicredit Group SA (UCG.MI)

Switzerland: UBS AG (UBS), Credit Suisse AG (CS)

Belgium: Dexia SA (DEXB.BT)

Netherlands: ING Groep NV (ING)

Spain: Banco Santander SA (SAN.MC)

Sweden: Nordea AB (NDA.SK)

Japan: Mitsubishi UFJ FG (8306.TO), Mizuho FG (MFG), Sumitomo Mitsui FG (8316.TO)

China: Bank of China (BACHY)

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