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Systemically Important Financial Institutions (SIFIs)

What Are Systemically Important Financial Institutions (SIFIs)?

Systemically Important Financial Institutions, or SIFIs, are a group of 29 large international banks that are required to hold extra equity capital against losses because of their size, complexity and importance to the international financial system. These institutions are generally regarded as "too big to fail," meaning they would require being bailed out by taxpayers if they were threatened with failure during a financial crisis.

The list of institutions has been put together since 2011 by the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS) and national financial authorities. The FSB was created in April 2009 in the wake of the global financial crisis to promote "the reform of international financial regulation and supervision."[1]

The list is primarily made up of central banks and financial regulatory and standard-setting agencies from around the world.[2]

G-SIBs

As of 2018, all of the institutions on the SIFI list are commercial banks, so the correct nomenclature for the group is Global Systemically Important Banks, or G-SIBs. Originally the SIFI list included several large international insurance companies. However, the FSB, together with the International Association of Insurance Supervisors (IAIS) and national authorities, elected not to identify any insurance companies in 2018 "in light of the progress by the IAIS in developing a holistic framework for the assessment and mitigation of systemic risk in the insurance sector."[3]

"Bucket" List

The list of G-SIBs is divided into "buckets" corresponding to the level of "additional common equity loss absorbency as a percentage of risk-weighted assets" each bank must hold. Currently there are no banks in the top bucket, which would require holding 3.5% additional capital.

The current list, as of November 2018, is as follows.

2.5% additional capital:

  • JP Morgan Chase

2.0% additional capital:

  • Citigroup
  • Deutsche Bank
  • HSBC

1.5% additional capital:

  • Bank of America
  • Bank of China
  • Barclays
  • BNP Paribas
  • Goldman Sachs
  • Industrial and Commercial Bank of China
  • Mitsubishi UFJ FG
  • Wells Fargo

1.0% additional capital:

  • Agricultural Bank of China
  • Bank of New York Mellon
  • China Construction Bank
  • Credit Suisse
  • Groupe BPCE
  • Groupe Crédit Agricole
  • ING Bank
  • Mizuho FG
  • Morgan Stanley
  • Royal Bank of Canada
  • Santander
  • Société Générale
  • Standard Chartered
  • State Street
  • Sumitomo Mitsui FG
  • UBS
  • Unicredit Group[4]

A new list of G-SIBs is released each November, with the next one due in November 2019.[5]

Summary

Systemically Important Financial Institutions, or SIFIs, are a group of 29 large international banks that are required to hold extra equity capital against losses to try to prevent their failure and a government bailout in a financial crisis. These institutions are generally regarded as "too big to fail." They have been designated as SIFIs by the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS) and national financial authorities since 2011 in response to the global financial crisis. The SIFI list is updated every November.