G-20 labels eight US banks as SIFIs
by KERRI PANCHUK
Friday, November 4th, 2011, 1:55 pm
The G-20 international monetary policy organization named eight U.S. banks systemically important financial institutions, or SIFIs, this week.
The eight institutions are part of a list of 29 global banks that obtained the designation from the G-20, putting the institutions in the position of having to comply with global SIFI requirements that will eventually enforce capital surcharges that fall somewhere between 100-basis points and 250-basis points, the G-20 said. Critics of the SIFI designation say it is simply a more politically correct way to describe "too big to fail" at said financial institutions without solving core operational issues.
The eight U.S. banks designated as SIFIs include Bank of America (BAC: 6.49 -6.08%), The Bank of New York Mellon, Citigroup (C: 30.34 -1.43%), Goldman Sachs (GS: 105.04 -2.45%), JPMorgan Chase (JPM: 33.97 -1.19%), Morgan Stanley (MS: 16.72 -1.36%), State Street (STT: 39.99 -0.94%) and Wells Fargo (WFC: 25.40 -1.59%).
The G-20 reported both positive and negative news stemming from the official naming of the world's systemically significant financial institutions. The positive is the fact that the move "should open the door for the big U.S. banks to boost their capital distributions in 2012," wrote analysts at MF Global. However, the negative is the fact that global regulators decided to hold off another 12 months before naming where in the 100-to-250 surcharge range the SIFIs will fall in, the firm said.
Surcharges on the SIFIs will not be phased in until January 2016. It is likely to take another three years before that process is complete. The G-20 noted in its Friday report that "there was no talk of accelerating the phase in (of the charge), which is another reason why we believe the door is open to higher capital distributions in 2012," MF Global said.
Write to Kerri Panchuk.