The Financial Stability Board (FSB) has issued the list of the global systemically important banks (G-SIBs) for 2025. While the number of banks on the list remains unchanged at 29, there have been a few changes from last year concerning the buckets assigned to some banks. To prepare the 2025 list, the FSB used 2024-end data and an assessment methodology designed by the Basel Committee on Banking Supervision.
Per the new list, Bank of America BAC and Industrial and Commercial Bank of China have been moved to a higher bucket i.e. from bucket 2 to bucket 3, in which they now require an extra capital buffer of 2% and not 1.5%.
On the other hand, Deutsche Bank Aktiengesellschaft DB has been moved to a lower capital requirement bucket. DB has been shifted from bucket 2 to bucket 1, in which, it now needs an extra capital buffer of 1% and not 1.5%.
Because bucket increases lead to higher required loss-absorbing capital, the buffer increases for Bank of America and Industrial and Commercial Bank of China will become effective from Jan. 1, 2027. However, bucket decreases, as in Deutsche Bank’s case, typically take effect immediately under the regulatory framework, unless local authorities delay.
Other than BofA, Industrial and Commercial Bank of China and Deutsche Bank, all other banks are assigned the same buckets as last year. Banking giant JPMorgan JPM remains in bucket 4, in which it needs an extra capital buffer of 2.5%. JPMorgan is the only bank in that bucket, and is considered the most systemic lender.
A Little Detail Regarding What G-SIBs Are
G-SIBs are the world’s largest and most interconnected banks whose failure would pose serious risks to the global financial system and the broader economy. They are identified each year by the FSB, which was established after the 2008 financial crisis to protect financial markets from another shock.
The G-SIBs are required to meet the board’s total loss-absorbing capacity standard, which measures the capital these banks need to hold to avoid the need for bailouts. Also, these banks need to maintain higher capital buffers to ensure that they can absorb losses without collapsing.
Apart from these, the G-SIBs face intensified and more intrusive supervision, including frequent stress tests, higher risk-management standards, stricter governance expectations and more detailed reporting to regulators.
Lastly, a G-SIB should have a credible recovery and resolution plan so that authorities can wind them down safely in a crisis.
Of the banks mentioned above, DB sports a Zacks Rank #1 (Strong Buy) while Bank of America and JPMorgan have a Zacks Rank #2 (Buy) and #3 (Hold), respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Bank of America Corporation (BAC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Deutsche Bank Aktiengesellschaft (DB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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