Three Big American Banks Pose Greater Systemic Risk, Regulator Says

By CHAD BRAY


LONDON — Three of America’s biggest banks potentially pose a greater risk to the global financial system than they did last year if they were to fail, global regulators said on Monday.
 
Citigroup, Bank of America and Wells Fargo, as well as the Industrial and Commercial Bank of China, all moved up in the latest ranking of so-called global systemically important banks by the Financial Stability Board, a Switzerland-based group of central bankers and financial regulators from the world’s largest economies.
 
Under the Financial Stability Board’s methodology, the change would normally subject the banks to additional capital requirements. However, the American banks are already subject to high capital requirements set out by the Federal Reserve.
 
“The G.S.I.B. measure announced this morning by the F.S.B. does not have an impact on any of Citi’s binding regulatory metrics,” a Citigroup spokeswoman said on Monday.
 
The latest ranking came as Citigroup announced on Monday that it would increase its common stock repurchase program by up to $1.75 billion, according to a regulatory filing.
 
Worldwide, 30 lenders are considered global systemically important banks and are subject to additional capital requirements.
 
They are separated into five potential risk categories, the highest of which would have to hold an additional 3.5 percent of capital on top of minimum regulatory requirements. No banks were put in that highest risk category this year, which is intended to discourage banks from becoming more systemically important.
 
“The changes in the allocation across buckets of the institutions on the list reflect the combined effects of data quality improvements, changes in underlying activity and the use of supervisory judgment,” the Financial Stability Board said in a news release.
 
The dollar’s strengthening against the British pound and other currencies also played a role in the latest shift in the rankings for American lenders.
 
Though they are not all in the same group, Citigroup, Bank of America, Wells Fargo and I.C.B.C. each jumped up one place from the categories they were assigned last year.
 
Under the Financial Stability Board’s rules, Citigroup joined JPMorgan Chase this year in the second-highest group, facing a 2.5 percent capital surcharge on top of minimum regulatory standards.
 
Citigroup said it already faced a 3 percent surcharge under Fed rules.
 
Bank of America is in the third group, facing a 2 percent surcharge under the board’s rules. Wells Fargo and I.C.B.C. are in the fourth group, with an additional 1.5 percent requirement under the board’s rules.
 
Higher capital buffer requirements set out by the Financial Stability Board began to be phased in this year and are expected to be fully in place by the beginning of 2019. The capital requirements disclosed Monday are to come into effect in 2018.

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