By Gareth Vaughan
Three banks are gone, and two new banks added to an updated version of the global list of systemically important financial institutions, or too big to fail banks, with five banks registered in New Zealand remaining.
The new list, from the Basel, Switzerland-based international banking regulatory group the Financial Stability Board, adds newcomers BBVA of economically troubled Spain, and Britain's Standard Chartered, which in August agreed to cough up US$340 million to settle claims made by New York authorities that it laundered money for Iran.
Gone is troubled French-Belgian bank Dexia, with French and Belgian authorities discussing a new recapitalisation of the already bailed out bank. Also gone is Britain's Lloyds and Germany's Commerzbank, which the Financial Stability Report says is due to a decline in their global systemic importance.
Still on the list are five banks registered in New Zealand in Citigroup and JP Morgan Chase of the US, Deutsche Bank of Germany, Britain's HSBC, and Japan's Mitsubishi UFJ FG. Others with operations in New Zealand on the list include Goldman Sachs of the US and Switzerland's UBS. France's Credit Agricole, which has bonds listed on the NZX's debt market, is also on the list. However, none of the big four Australian banks, owners of New Zealand's ANZ, ASB, BNZ and Westpac, are included.
It's an updated version of a list first published a year ago when the Financial Stability Board said the list would be updated annually based on new data and published each November. The new list uses data from the end of 2011.
The systemically important financial institutions are defined as financial institutions whose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the world's wider financial system and economic activity.
The naming of the too big to fail banks comes after leaders from the Group of 20 (G20) asked the Financial Stability Board to develop a policy framework to address the systemic and moral hazard risks associated with such entities in the wake of the global financial crisis in 2008-09 when the failure of major financial institutions led to a combination of financial market chaos (Lehman Brothers) and taxpayer funded bailouts in several cases including Citibank, American International Group, Royal Bank of Scotland and Lloyds.
The Financial Stability Board has broken the list up into groups, or "buckets," indicating the capital level above international minimums banks will be required to meet when these surcharges are phased in from 2016. In the highest group, at 2.5 percentage points, are Citigroup, Deutsche Bank, HSBC and JP Morgan Chase.
Next at 2 percentage points are Barclays and BNP Paribas. At 1.5 percentage points are Bank of America, Bank of New York Mellon, Credit Suisse, Goldman Sachs, Mitsubishi UFJ FG, Morgan Stanley, Royal Bank of Scotland and UBS.
And in the last group, requiring capital 1 percentage point above international minimums is Bank of China, BBVA, Groupe BPCE, Credit Agricole, ING Bank, Mizuho FG, Nordea, Santander, Societe General, Standard Chartered, State Street, Sumitomo Mitsui FG, Unicredit Group and Wells Fargo.
And here's the full list:
JP Morgan Chase
Bank of America
Bank of New York Mellon
Mitsubishi UFJ FG
Royal Bank of Scotland
Bank of China
Sumitomo Mitsui FG
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