RBI names SBI, ICICI Bank D-SIBs as per framework

The State Bank of India (SBI) and ICICI Bank have been named as domestic systemically important banks (D-SIBs) by the Reserve Bank of India (RBI) on Monday.

The Reserve Bank had issued the framework for dealing with D-SIBs on July 22, 2014. The D-SIB framework requires RBI to disclose the names of banks designated as D-SIBs every year in August starting from August 2015. The framework also requires that D-SIBs may be placed in four buckets depending upon their systemic importance scores (SISs). Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it, as mentioned in the D-SIB Framework.

The D-SIB framework specifies a two-step process of identification of D-SIBs. In the first step, the sample of banks to be assessed for systemic importance has to be decided. The selection of banks in the sample for computation of SIS is based on analysis of their size as a percentage of annual GDP.

The additional common equity tier-1 (CET1) requirements applicable to D-SIBs will be applicable from April 1, 2016, in a phased manner, and would become fully effective from April 1, 2019. The additional CET1 requirement will be in addition to the capital conservation buffer, RBI said.

In case a foreign bank having branch presence in India is a global systemically important bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its risk weighted assets (RWAs) in India, RBI added.

“RBI has named the State Bank of India as a domestic systematically important bank as expected. However, the additional capital requirement of tier-I Capital has been lowered and time for adhering has been deferred by one year as compared with draft guidelines. SBI currently has a much higher level of tier-I at 9.62 per cent as opposed to seven per cent required under the current guidelines,” SBI Chairman Arundhati Bhattacharya said.

“Given our size and significant presence across the financial sector, it was expected that ICICI Bank would be classified as systemically important. The bank’s capital adequacy is well in excess of regulatory requirements,” ICICI Bank MD and CEO Chanda Kochhar said.