Moving on from a framework finalized for global systemically-important banks (G-SIBs), the Basel Committee has now proposed standards for “domestic systemically-important banks” or D-SIBs.  Like the G-SIB standards, this one is capital-focused, adding a surcharge for banks that cross national criteria for systemic importance.  However, because these are national, not global standards, much in them is left to national discretion.  This raises questions about which banks would be subject to costly capital surcharges and how the D-SIB requirements would be implemented on the largest banks that are both G-SIBs and, at least in some jurisdictions, also D-SIBs.  Home/host-country disputes are possible, as are differing criteria for designation that exacerbate differences in the cross-border regulatory framework for banking organizations.  However, the Basel Committee, building on instructions from the G-20 heads of state, believes this D-SIB surcharge is warranted to address the costs that could still arise for taxpayers and economies from the failure of banks beneath the thresholds for G-SIBs.  No comparable standards for domestic systemically-important financial institutions (D-SIFIs) have been proposed and those for G-SIFIs are only now beginning to advance.

The full report is available to retainer clients.  To find out how you can sign up for the service, click here