Domestic Systematically Important Banks

Table of Contents

Context

The Reserve Bank of India (RBI) has released the list of Domestic Systematically Important Banks.

D-SIB is a financial institution that is so large and significant that its failure could have a catastrophic impact on the financial system and economy. They are also known as “Too Big To Fail” (TBTF) banks.
Qualifying Criteria: To identify the D-SIBs, the RBI considers only those banks whose size is equal to or more than 2% of GDP.
The Basel Committee on Banking Supervision (BCBS) has recommended 4 indicators to assess the importance of a bank: size, interconnectedness, substitutability and complexity.
Presently SBI, ICICI Bank and HDFC Bank have been identified as Domestic Systemically Important Banks (D-SIBs
Bucket-Based Surcharges: Banks are categorised into buckets based on systemic importance scores. These buckets determine the Common Equity Tier 1 (CET1) capital requirement:
- SBI (Bucket 4): Additional CET1 requirement of 80%.
- HDFC Bank (Bucket 3): Additional CET1 requirement of 40%.
- ICICI Bank (Bucket 1): Additional CET1 requirement of 20%.

The Financial Stability Board (FSB) in consultation with the Basel Committee on Banking Supervision annually identifies G-SIBs.
Qualifying Criteria: Only 75 largest Global Banks considered.
In 2023, 29 banks were accorded G-SIB status.