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ICBC joins ‘too-big-to-fail banks’
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The Industrial and Commercial Bank of China, the country’s biggest bank, was added to the Financial Stability Board’s list of “too-big-to-fail banks” for the first time and now has to meet higher loss absorbency requirements due to the risk it poses to global financial markets.
ICBC was the only one added to the list of global systematically important banks by the Basel-based international financial regulator this year. The bank is required to have 1 percentage point of extra capital, or maintain a minimum core tier-1 capital of 8 percent and a total capital adequacy ratio of 11.5 percent.
“Global systemically important banks are seen as ‘stabilizers’ of the global banking industry,” ICBC said on its website yesterday.
“A global systemically important financial institution has significant functions in the international financial market and global characteristics. Significant risk event or failure of these institutions will impose a relevantly large impact, or even systemic risk, on the global economic and financial system.”
ICBC said its overseas expansion is one of the reasons why the regulator considered it important to the global financial system. Its overseas assets were worth US$182.2 billion at the end of June, accounting for 6 percent of the total assets of the group, the banking giant said in the online statement.
The international banks identified by the board need to meet higher supervisory standards for risk management functions, data aggregation capabilities, risk governance and internal controls. The higher loss absorbency requirements for them will be phased in from January 2016, and implemented fully by January 2019, according to the regulator.
The Bank of China, the country’s biggest foreign exchange bank, is in the same category as ICBC. Of the 29 too-big-to-fail banks, 16 are from Europe, eight are US lenders, and five are in Asia.
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