Global Systemically Important Bank
Also called: G-SIB · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
A Global Systemically Important Bank (G-SIB) is a bank so large and so connected to other banks that its trouble could disrupt the world financial system. The Financial Stability Board (FSB), set up in 2009 after the global financial crisis, publishes the list every year. G-SIBs must hold 1-3.5% extra loss-absorbing capital. They must also hold TLAC (total loss-absorbing capacity), which is debt that can be used to absorb losses if the bank fails.
Example
Large international banks such as JPMorgan Chase are on the G-SIB list. No Indian bank is a G-SIB. India's biggest bank, SBI, is only a domestic systemically important bank. The statement "an Indian bank is a G-SIB" is a Prelims trap, and it is false.
Don't confuse with
- Domestic Systemically Important Bank (D-SIB): RBI names these banks under its 2014 framework, based on their importance to India's system. They are SBI, HDFC Bank and ICICI Bank. From April 2025 they hold extra CET1 of 0.80%, 0.40% and 0.20% respectively.
Related concepts
- High-Quality Liquid Assets
- Liquidity Coverage Ratio
- Net Stable Funding Ratio
- Domestic Systemically Important Bank
- Too big to fail
- Moral hazard
- Prompt Corrective Action
- Deposit insurance
- Bail-out
- Bail-in