SBI, ICICI Bank, HDFC Bank are ‘too-big-to-fail’: RBI


Banking regulator the Reserve Bank of India (RBI) on January 19 revealed the Domestic Systemically Important Banks (D-SIBs) list for 2020 and included State Bank of India (SBI), ICICI Bank and HDFC Bank in it. According to RBI, these banks are systematically important and ‘too-big-to-fail’.

This list was first announced by the Central Bank in 2015 which also included SBI and ICICI Bank. HDFC Bank’s name was later included in September, 2017. ‘Too-big-to-fail’ lenders are banks whose failure is likely to impact the financial system as a whole because of their size and reach of opertaions. This list is published every year by the RBI.

As per the guidelines, such lenders are bound to adhere to additional capital requirements. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs was phased-in from April 1, 2016 and became fully effective from April 1, 2019.

Rules suggest that the additional common equity Tier 1 requirement as a percentage of Risk Weighted Assets (RWAs) for SBI is 0.6 per cent and that of other two lenders is 0.2 per cent, according to RBI.

The RBI issued the framework for dealing with D-SIBs on July 22, 2014. The D-SIB framework is dependent on the Reserve Bank to disclose the names of banks included in D-SIBs starting from 2015 and place these banks in appropriate buckets depending upon their Systemic Importance Scores (SISs).

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 “In case a foreign bank having branch presence in India is a Global Systemically Important Bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its Risk Weighted Assets (RWAs) in India, i.e., additional CET1 buffer prescribed by the home regulator (amount) multiplied by India RWA as per consolidated global Group books divided by total consolidated global Group RWA,” said the RBI.

The data collected for the latest report was collected from banks as of March 31, 2020.

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