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Domestic Systematically Important Banks

Context

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

About Domestic Systematically Important Banks (D-SIB)

  • 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%.

Global Systemically Important Banks (G-SIBs)

  • 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.
  •  Important G-SIBs: JP Morgan Chase, Bank of America, Citigroup, HSBC, Agricultural Bank of China, Bank of China, Barclays etc.

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Piyush
Piyush
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Greetings! I'm Piyush, a content writer at StudyIQ. I specialize in creating enlightening content focused on UPSC and State PSC exams. Let's embark on a journey of discovery, where we unravel the intricacies of these exams and transform aspirations into triumphant achievements together!