The Financial Stability Board (FSB) released its updated list of systemically important global banks on Thursday, and still none of the big Canadian banks made the list.
There has been some turnover, compared with the initial list however. Two banks have been added (BBVA and Standard Chartered) and three have been dropped. Dexia is off the list, it notes, as it is undergoing an orderly resolution process; and, Commerzbank and Lloyds have been removed “as result of a decline in their global systemic importance”.
The list also sets out the various tiers of systemic importance, which determines how much extra capital a bank has to hold. No banks are in the top tier. Citigroup, Deutsche Bank, HSBC, and JP Morgan Chase comprise the second tier (meaning they must hold 2.5% in additional capital; followed by Barclays and BNP Paribas in the next tier (2.0%). Wall Street firms such as Credit Suisse, Goldman Sachs, Morgan Stanley, and UBS are in the next group, with several others; and there are 14 banks in lowest tier. The list is to be updated every November.
At the same time, the FSB also released a progress report on reforms to national resolution regimes to plan for the bankruptcy of a systemically important firm. It notes that this remains a work in progress in several countries, with reforms not complete and still ongoing. Some headway has been made in resolution planning, it says, however, effective implementation is contingent on the requisite legal frameworks being in place and may also require some adaptation of firms’ financial and organizational structures, it adds. It is planning to publish draft guidance on key aspects of recovery and resolution planning soon, it notes.
It also released a progress report on increasing supervision for these systemically important banks, which also concludes that further steps are needed to make supervision more proactive and effective. And, the report makes further recommendations to support improvement in supervision.