Move Over HSBC: Citi Joins JP Morgan at the Top

  • By: Staff Editor
  • Date: November 21, 2016
  • Source: ComplianceOnline
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Topping the global regulators' list of systemically important banks are Citi and JP Morgan, with HSBC vanquishing its spot to Citi and slipping down to accompany BNP Paribas, Deutsche Bank, and Bank of America.

Post the 2007-09 financial crisis, the G20 economies pledged to set aside additional capital as per the level of risk they represent. Together, the G20 economies account for:

  • About 85% of the gross world product (GWP)
  • 80% of world trade (if excluding EU intra-trade - 75%)
  • Two-thirds of the world population

Given the magnitude behind these figures, the risk these economies represent in the event of a market collapse were to be combatted by the additional capital holdings of the banks – a member list comprising 30 lenders.

The G20's Financial Stability Board (FSB), published on Monday, the annual update of rankings where Citi has replaced HSBC at the top with a 2.5 percent capital surcharge above global minimum requirements.

HSBC, BNP Paribas, Deutsche Bank, and Bank of America stand in the next category, with a surcharge of 2 percent. Barclays too dropped a category to the 1.5 percent surcharge group, while Morgan Stanley fell to the 1 percent surcharge group.

To ensure and preserve financial stability, the 30 lenders will also have to begin holding bonds from 2019 – these bonds can be written down to replenish capital burned through in a crisis.

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