U.S. lenders JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. all dropped a bucket lower in the Financial Stability Board's 2020 list of the world's most systematically important banks, while China Construction Bank Corp. rose to join Bucket 2.
The global systemically important bank, or G-SIB, label is given to larger institutions where a major disruptive event, or their collapse, would cause instability in the wider industry. Such institutions are subject to more stringent capital requirements. G-SIBs are required by regulation to hold higher capital buffers, total loss-absorbing capacity, resolvability and an increased level of supervision.
JPMorgan's additional capital buffer requirement dropped to 2.0% from 2.5% as it fell to Bucket 3 in 2020 from Bucket 4 the year-before, which leaves no banks in the top two buckets. The top U.S. regulator, the Federal Reserve, also calculates a systemic risk score and uses the higher score in determining capital surcharges. In recent years, the Fed's scores for JPMorgan have been significantly higher than the FSB's score.
China Construction Bank was the only lender to move up in 2020. The Chinese bank's additional capital buffer requirement has risen to 1.5% in 2020 from 1.0% in 2019 as a result of its rise up one bucket.
Citigroup Inc. and U.K. lender HSBC Holdings PLC are the two other banks along with JPMorgan in Bucket 3 with an additional capital buffer requirement of 2.0%.
Goldman Sachs Group Inc. and Wells Fargo & Co. are now in Bucket 1 at 1.0% from 1.5% in 2019.
The list, based on end-2019 data, includes eight U.S. banks; four banks each from China and France; three banks each from the U.K. and Japan; two banks each from Switzerland and Canada; and one bank each from Spain, the Netherlands, Germany and Italy.
There was no year-on-year change to the composition of the G-SIB list.