Here is the list of so-called global systemically important financial institutions by country (hat tip Barry Ritholtz).
Belgium: Dexia
China: Bank of China
France: Banque Populaire, BNP Paribas, Crédit Agricole, Société Générale
Germany: Commerzbank, Deutsche Bank
Italy: Unicredit
Japan: Mitsubishi, Mizuho, Sumitomo Mitsui
Netherlands: ING
Spain: Santander
Sweden: Nordea
Switzerland: Credit Suisse, UBS
UK: Barclays, HSBC, Lloyds, Royal Bank of Scotland
US: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, State Street, Wells Fargo
That’s 29 in total. European banks dominate the list and number seventeen in total. Four banks are domiciled in Asia while eight are from the US. If any of these financial institutions became distressed or failed in a disorderly way like Lehman Brothers, their mere size, complexity and interconnectedness would bring the financial system to its knees. The purpose of identifying these institutions then is to hold them to a different standard and therefore reduce contagion risk in the financial sector. Right now, the rules are that institutions will have to hold up to 3.5% extra capital to absorb losses. These requirements will be introduced along with the Basel III capital rules between the beginning of 2016 and year-end 2018.
Who’s missing in your view?
I have written a few posts on which banks are too big to fail, first in July 2008 before Lehman failed. I made the cut-off then at 200 billion in assets, which included 19 institutions, because at the time the FDIC simply didn’t have the funds to deal with a failure that large. I had asked “What if a large US regional bank goes to the wall?” and the answer was the FDIC could resolve it but would have run out of funds. That shows you how unprepared the US was for the crisis. When one of the 19, Lehman experienced a disorderly bankruptcy, all hell broke loose.
The European banks are where the action is today though. In February 2009 I did a partial list of banks that are too big to rescue for their national governments as well as one of the top 25 European banks by assets. A few of these banks aren’t on the sifi list. Here are the banks I think could be on the list but aren’t:
Commonwealth Bank, National Australia Bank, Westpac Banking Group (Australia)
Erste Bank (Austria)
KBC (Belgium)
Scotia Bank (forgot to add in my haste!), Royal Bank of Canada, Toronto-Dominion Bank, CIBC, Bank of Montreal (Canada)
China Construction Bank, ICBC (China)
Danske Bank (Denmark)
Intesa Sanpaolo (Italy)
BBVA, BSCH (Spain)
SEB, Swedbank, Handelsbanken (Sweden)
Also see: The largest European banks by assets, June 2010 (a rundown of the biggest banks in Europe a globally)
The Financial Stability Board’s report that led to these banks’ being identified is below.