The system is divided into four “clusters” in order of how systemic, international, interconnected, and complex they are. JPMorgan Chase and Co. ranked higher than its closest peers.
Last year, the US bank, which also obtained this recognition, shared the highest segment with HSBC and Citigroup. BNP Paribas and Goldman Sachs also moved up a notch in the ranking on systemic relevance.
“Being included in the implies means having to hold additional capital and undergo more intense supervision to avoid a repeat of the taxpayer bailouts that happened during the global banking crisis more than a decade ago,” Reuters said.
In practice, banks often have capital reserves that already exceed FSB requirements. JPMorgan had a core capital ratio of 12.9% equity to risk-weighted assets at the end of September, well above the low of 11.3% set by the Fed. The FSB capital surcharge for JPMorgan is now at 2.5%, compared to 2% last year.
“US banks fought aggressively, if unsuccessfully, against the FSB capital surcharges, but they are unlikely to make much progress under the administration of Democratic President Joe Biden. However, the FSB raised the prospect of easing for euro zone banks on how their exposures to other bloc nations are calculated“Reuters assured.
Eurozone lenders argue that they are regulated by the European Central Bank within the framework of the EU banking union and therefore their exposures to other eurozone countries should not be considered “cross-border”, resulting in a stricter treatment.
The FSB said Tuesday that the Basel Committee, which writes global bank capital rules, will conduct a short-term review of cross-border exposures within the banking union relative to its list of most systemic lenders.
Source From: Ambito
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