State Bank of India (SBI), HDFC Bank and ICICI Bank continue to be domestic systematically important banks (D-SIBs), the Reserve Bank of India (RBI) said on Monday.
SIBs are perceived as banks that are ‘too big to fail (TBTF)’. This perception of TBTF creates an expectation of government support for these lenders in times of distress. Due to this, these banks enjoy certain advantages in the funding markets. In addition to a minimum capital conservation buffer, such lenders must have an additional common equity tier-I requirement as a percentage of their risk-weighted assets.
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According to the central bank’s norms on domestically systematically important banks, SBI has additional common equity tier-I requirement of 0.60%. This requirement is 0.20% for both ICICI Bank and HDFC Bank.
The RBI had issued the framework for D-SIBs in 2014. It requires the central bank to disclose the names of banks designated as systematically important starting from 2015 and place them in appropriate buckets depending on their systemic importance scores.
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According to RBI, D-SIBs are financial institutions that are large enough where they cannot be allowed to fall. In order to be listed as a D-SIB, a bank needs to have assets that exceed 2% of the national gross domestic product.
The RBI had announced SBI and ICICI Bank as D-SIBs in 2015 and 2016. Based on data as on March 31, 2017, HDFC Bank was classified as a D-SIB. The current update is based on data as on March 31, 2022.