Systemically Important Banks

Daryl Collins, David Rule

This article was first published as a chapter in Basel III and Beyond, by Risk Books.

10.1 Introduction

During the 2007–2009 financial crisis, a number of systemically important financial institutions in different jurisdictions experienced significant distress or failure with several requiring unprecedented levels of government support. This chapter sets out the international policy response, as it has developed so far, towards systemically important banks (SIBs). Policy in this area is still being developed and the purpose of the chapter is to describe the current international debate. It does not set out the position of the UK Financial Services Authority.

A joint report by the International Monetary Fund (IMF), Bank for International Settlements (BIS), and Financial Stability Board (FSB) to the G20 finance ministers and governors in 2009 defined systemic risk as “a risk of disruption to financial services that is (i) caused by an impairment of all or parts of the financial system and (ii) has the potential to have serious negative consequences for the real economy” (IMF, BIS, FSB 2009). While this chapter focuses on the policy response to SIBs, it is worth noting that