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FSB Issues 2021 G-SIB List: JPMorgan (JPM), Goldman (GS) Riskier

The Financial Stability Board (“FSB”) has issued the list of the global systemically important banks (G-SIBs) for 2021. While the number of banks on the list remains unchanged at 30, there have been a few changes from last year concerning the buckets assigned to some banks.

Per the new list, JPMorgan Chase & Co. JPM is again being considered the most dangerous of the 30 banks. The Wall Street giant has moved to a higher bucket i.e. from bucket 3 to bucket 4, in which it now requires an extra capital buffer of 2.5% and not 2%.

In 2019 as well, JPMorgan was placed in bucket 4, which is the highest bucket according to the list. Banks that are allotted bucket 4 are considered the most systemic lenders. Surprisingly, last year, bucket 4 was empty.

Per the current list, Goldman Sachs GS has moved up from bucket 1 to bucket 2. Goldman Sachs will now require an extra capital buffer of 1.5% and not 1%. Notably, bucket 1 is the lowest bucket applied to 19 of the 30 lenders in 2020.

BNP Paribas SA BNPQY has moved up from bucket 2 to bucket 3. In the third bucket, BNP Paribas now accompanies banks like Citigroup C and HSBC Holdings plc HSBC.

Accordingly, Citigroup, HSBC and BNP Paribas have to hold a capital buffer of 2%.

After the 2008 financial crisis, the FSB was established to protect financial markets from another shock. To prepare the 2021 G-SIBs list, the FSB used 2020-end data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).

The 30 banks mentioned on the list are those with extensive global presence whose failure can rattle the global economy.

These banks are required to meet the board’s total loss-absorbing capacity (TLAC) standard, which measures the capital these banks need to hold to avoid the need for bailouts and higher capital buffer resolvability and increased supervisory expectations.

Conclusion

While the performance of banks has been impressive so far this year, the overall financial conditions have not improved much from last year. Even though the conditions have improved in some parts of the globe in relation to the coronavirus pandemic, there is still some virus-induced uncertainty in many parts of the world. This has been hurting banks’ growth to some extent.

Moreover, the continued low-interest rate environment across the United States and elsewhere has been hurting banks’ profitability to a great extent.

Currently, JPMorgan, Goldman Sachs, BNP Paribas and Citigroup carry a Zacks Rank #3 (Hold) while HSBC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
 
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BNP Paribas SA (BNPQY): Free Stock Analysis Report
 
HSBC Holdings plc (HSBC): Free Stock Analysis Report
 
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