Systemically important banks
A domestic systemically important bank (D-SIB) that fails or experiences distress could disrupt Canada’s financial system and economy.
The failure of a global systemically important bank (G-SIB) could have a significant impact on the global financial system and economy since G-SIBs are large, complex, and interconnected with other global banks.
Identifying systemically important banks
The Basel Committee on Banking Supervision applies a set of risk indicators to assess the requirements for banks.
For D-SIBs, the bank-specific indicators are grouped into four categories:
- Size – how big is its share of domestic banking activity
- Substitutability – how easily can it be replaced as a market participant and financial service provider
- Complexity – how many different services does it offer
- Interconnectedness – how connected is it to other financial institutions
For G-SIBs, a fifth category is added:
- Cross-jurisdictional activity – how much activity does it undertake in other financial jurisdictions
Canada’s systemically important banks
Canada has 6 D-SIBs:
-
Bank of Montreal
- Bank of Nova Scotia
- Canadian Imperial Bank of Commerce
- National Bank of Canada
- Royal Bank of Canada
- Toronto-Dominion Bank
The Royal Bank of Canada and Toronto-Dominion Bank are also considered G-SIBs.
D-SIBs have stricter requirements than other banks in Canada, including:
-
capital absorbency (for example, the domestic stability buffer applies to these banks)
- disclosure
- supervisory expectations
This higher level of supervision helps to ensure that these banks remain prudentially sound to protect the Canadian financial system.
At a global level, G-SIBs have even stricter requirements and higher levels of supervision to ensure they remain prudentially sound to protect the global financial system.
