The change means the four banks are required to have a higher capacity to absorb losses. Citi’s was moved from 2% of its risk-weighted assets to 2.5%, meaning it is only the second bank to enter the Financial Stability Board’s highest-risk category, alongside JP Morgan.
Bank of America moved up to the category below Citi, meaning its risk-weighted asset requirement went from 1.5% of assets to 2%. Wells Fargo, and the Industrial and Commercial Bank of China, went from 1% to 1.5%.
The Financial Stability Board, which co-ordinates the supervision of global banks, published the update of its list November 21. The four banks were the only four upward movers among the 30 listed as systemically important. The three US banks may have been affected by gains in the US dollar, as the FSB’s capital requirements are calculated in euros.
However HSBC, Barclays and Morgan Stanley got a balance-sheet reprieve. All had their loss-absorbency requirements reduced, from 2.5% to 2% in HSBC’s case, from 2% to 1.5% in Barclays’ case and 1.5% to 1% for Morgan Stanley.
Bank of America declined to comment. Citi and Wells Fargo did not respond to a request for comment in time for publication. ICBC could not be reached for comment.
Separately, the Financial Stability Board also released the 2016 update to its list of systemically-important insurance groups. There were no changes to this list or the loss-absorbency requirements of the nine firms on it, who are Aegon, Allianz, American International Group, Aviva, Axa, MetLife, Ping An Insurance of China, the US insurer Prudential Financial and Prudential plc, a UK insurer that isn’t linked to Prudential of the US.