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Sunday, March 07, 2021

‘Too big to fail’ list: SBI, ICICI Bank, HDFC Bank remain

According to analysts, too big to fail is a phrase used to describe a bank or company that’s so entwined in the economy that its failure would be catastrophic.

By: ENS Economic Bureau | Mumbai |
Updated: January 20, 2021 6:08:24 am
“Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it,” the RBI said.

The Reserve Bank of India (RBI) has retained State Bank of India, ICICI Bank and HDFC Bank as domestic systemically important banks (D-SIBs) or banks that are considered as “too big to fail”.

The D-SIB framework requires the Reserve Bank to disclose the names of banks designated as D-SIBs starting from 2015 and place these banks in appropriate buckets depending upon their systemic importance scores (SISs). “Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it,” the RBI said.

According to analysts, too big to fail is a phrase used to describe a bank or company that’s so entwined in the economy that its failure would be catastrophic.

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 — additional CET1 buffer prescribed by the home regulator multiplied by India RWA as per consolidated global group books divided by total consolidated global group RWA, it said.

Based on the methodology provided in the D-SIB framework and data collected from banks as of March 31, 2015 and March 31, 2016, the Reserve Bank had announced State Bank of India and ICICI Bank as D-SIBs on August 31, 2015 and August 25, 2016, respectively, the RBI said.

“Based on data collected from banks as on March 31, 2017 and March 31, 2018, the Reserve Bank had announced State Bank of India, ICICI Bank and HDFC Bank as D-SIBs on September 04, 2017 and March 14, 2019 respectively. Current update is based on the data collected from banks as on March 31, 2020,” the central bank said. The Reserve Bank had issued the framework for dealing with domestic systemically important banks on July 22, 2014.

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