Forget Deutsche Bank, These 2 American Banks Are Now “The Most Systemically Dangerous In The World”

Back in the summer we wrote about an IMF report that flagged Deutsche Bank (DB) as the “most important net contributor to systemic risks” (see “‘Deutsche Bank Poses The Greatest Risk To The Global Financial System’: IMF”).Those who read our site frequently were likely not terribly surprised by the IMF’s conclusion.

Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC (HSBC) and Credit Suisse (CS). In turn, Commerzbank, while an important player in Germany, does not appear to be a contributor to systemic risks globally. In general, Commerzbank tends to be the recipient of inward spillover from U.S. and European G-SIBs. The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime.

That said, we suspect the latest ranking of global systemically important banks (G-SIBs) by the Financial Stability Board may be a bit more surprising to our readers, among others, as it features two of America’s largest banks right at the very top. 

Of course, Citigroup (C) was quick to release a statement saying that its rise in the FSB list “does not drive a binding capital constraint” on the bank, and that it’s already subject to a higher 3% surcharge imposed by the U.S. Federal Reserve. While that may be true, any relative risk ranking that finds Citibank and JP Morgan (JPM) more risky that Deutsche Bank has to be concerning to U.S. regulators.

The Financial Stability Board was established after the global financial crisis in 2009 by the Heads of State of the G20 with a mandate to “promote financial stability.” As such, the board ranks the 30 most systemically important financial institutions each year and assigns them to “capital surcharge” risk buckets based on a variety of risk measures.In this year’s rankings, Citigroup, BofA (BAC) and Wells Fargo (WFC) were the biggest losers and all face higher capital surcharges as a result.Meanwhile, London-based banks HSBC and Barclays all fared better in 2016’s rankings.Per Bloomberg: