Infographic: Systemically Important Banks (SIBs)
Canada has two types of systemically important banks: domestic systematically important banks (D-SIBs) and global systemically important banks (G-SIBs).
Date: March 5, 2025
Text version
1. What is a SIB?
In Canada, there are 2 types of systemically important banks (SIBs):
- Domestic systemically important banks (D-SIBs): If one of these banks fails or experiences distress, it could disrupt Canada’s financial system and economy.
- Global systemically important banks (G-SIBs): Difficulties or failure of one of these complex and interconnected banks could cause significant disruption to the global financial system and economy.
The Financial Stability Board (FSB) published a set of policy measures to address the risk of an entire system breakdown or of moral hazard where a SIB takes on more risk with the belief, they are too big to fail.
2. How are SIBs identified?
The FSB identified an initial group of G-SIBs using a methodology developed by the Basel Committee on Banking Supervision. It is based on 12 indicators that measure risk and are grouped into 5 broad categories. Canada used a similar methodology to identify a group of D-SIBs.
- Size
- Interconnectedness
- Substitutability
- Cross-jurisdictional activity
- Complexity
3. Once identified, what are SIBs subject to?
- Capital surcharges (additional capital to absorb unexpected losses and reduce the probability of failure)
- Total loss absorbing capacity (TLAC) requirements (ensure SIBs have enough resources to absorb losses in failure and to minimize taxpayers’ exposure to losses)
- Enhanced resolvability expectations in case of a failure or insolvency, including recovery and resolution plans
- Greater supervisory intensity and disclosure requirements
4. Are all SIBs the same?
No, G-SIBs are sorted into 5 separate FSB-established buckets based on their potential impact on the global financial system, with increasing capital surcharges from bucket 1 to the highest in bucket 5.
- Currently, Canada has 2 G-SIBs in bucket 1: Royal Bank of Canada and Toronto-Dominion Bank. These banks are also designated as D-SIBs along with 4 others (Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and National Bank) by order of the Superintendent of Financial Institutions pursuant to the Bank Act.
- All 6 D-SIBs are currently subject to the same capital surcharge in line with G-SIB bucket 1.
| Bucket | Capital surcharge | Number of international G-SIBs |
|---|---|---|
| 5 | 3.5% | 0 |
| 4 | 2.5% | 1 |
| 3 | 2.0% | 2 |
| 2 | 1.5% | 12 |
| 1 | 1.0% | 14 (including 2 from Canada) |
|
Less loss absorbency in bucket 1 up to more loss absorbency in bucket 5. As of November 2024 |
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5. Did you know?
SIBs’ capital expectations are made up of multiple requirements and buffers with a broader stack of expectations, as applicable. This ‘capital stack’ helps ensure a sound and resilient banking system in Canada while protecting depositors and creditors.
Minimum Capital Requirements: 4.5% of risk-weighted assets
Capital Conservation Buffer: 2.5% of risk-weighted assets
Surcharge: 1% of risk-weighted assets
Domestic Stability Buffer: 3.5% of risk-weighted assets effective November 1, 2023