Dive Brief:
- New rankings Wednesday from the Financial Stability Board (FSB) suggest JPMorgan Chase is no longer the world’s most systemically important bank.
- The Basel, Switzerland-based panel recommended a lower capital burden for the U.S.’s largest bank — an additional buffer of 2%, down from 2.5% — than it had in previous annual assessments of 30 financial institutions. The lower ranking means any instability at the bank poses less risk to the global financial system.
- Two other U.S. banks — Goldman Sachs and Wells Fargo — also ranked less risky, according to the FSB's assessment Wednesday. The panel recommended a 1% additional buffer for those firms.
Dive Insight:
JPMorgan had been alone atop the FSB’s list since 2017. The bank's 2% recommended buffer puts it on par with Citi and HSBC in terms of perceived risk.
Only one bank, China Construction Bank, moved up a level, to a 1.5% recommended additional buffer, from the FSB’s previous ranking. Joining China Construction Bank at 1.5% are Bank of America, Barclays, BNP Paribas, Deutsche Bank, Bank of China, Industrial and Commercial Bank of China and Mitsubishi UFJ Financial Group.
The FSB’s rankings are based on data from the end of 2019 — before the coronavirus pandemic, which has caused banks worldwide to set aside tens of billions of dollars to offset potential credit losses. The rankings take into account a bank’s size, the scope of its cross-border business and connections to other companies.
Joining Goldman Sachs and Wells Fargo at the 1% level are BNY Mellon, Morgan Stanley, State Street, Credit Suisse, UBS, Santander, Royal Bank of Canada, TD, Standard Chartered, Societe Generale, Credit Agricole, BPCE, ING Bank, UniCredit, Mizuho, Sumitomo Mitsui and Agricultural Bank of China.
The FSB, led by Federal Reserve Vice Chairman for Supervision Randal Quarles, includes representatives from the European Central Bank, the Bank of England and other governing bodies. The panel suggests changes that national supervisors can put into place. In addition to capital burden recommendations, banks on the FSB’s list are held to higher expectations for risk management, governance and internal controls.
JPMorgan Chase declined to comment to Bloomberg over its lower ranking.
