New Data Shed Light on Global Banking Risks

The OFR released a brief today that analyzes new data about global systemically important banks (G-SIBs). The OFR also introduced an online interactive chart for users to compare data about the 30 G-SIBs. A G-SIB is a large bank or bank holding company whose failure could pose a threat to the global financial system.

The authors find that U.S. banks remain among the most systemically important. Several Chinese banks have notable increases in their systemic importance scores. China Construction Bank is a new addition to the list of G-SIBs.

The authors of the brief — Bert Loudis and Meraj Allahrakha — used data from bank websites for the analysis. The OFR compiled these data in a spreadsheet that can be found here.

Regulators use the G-SIB data to calculate how much extra capital large banks must hold. The Basel Committee on Banking Supervision established a G-SIB capital surcharge. The surcharge is supposed to reduce the chance of default by the largest banks and discourage them from becoming more systemically important.

Implementation of the G-SIB capital surcharge began in 2016. The requirements will be fully phased in by 2019.

For the first time, the data (as of Dec. 31, 2014) include details about banks that were required to disclose data, but were not deemed G-SIBs. This release contributes to a broader comparison of the world’s largest banks. In most cases, the data show a clear distinction in systemic importance between G-SIBs and the other banks that disclosed data. However, for a handful of borderline banks, the design of the scoring system appears to have an impact on G-SIB designation because of the weight the Basel Committee put on certain systemic importance indicators.

The brief uses newly available data to enrich the analysis of the world’s largest banks. Comparing banks from different countries is often difficult due to different accounting standards. These data allow for a standardized comparison of international banks. Analyzing them helps identify potential concerns about the concentration of risks in the most systemically important banks.

Stacey Schreft is Deputy Director for Research and Analysis at the Office of Financial Research