RBI designates State Bank of India and ICICI Bank as Domestic Systemically Important Banks

The Reserve Bank of India has announced the designation of State Bank of India and ICICI Bank as Domestic Systemically Important Banks (D-SIBs).

The Reserve Bank had issued the Framework for dealing with Domestic Systemically Important Banks (D-SIBs) on 22 July 2014. The D-SIB Framework requires the Reserve Bank 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 (State Bank of India 0.6% and ICICI Bank 0.2%), 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.

Source: http://www.business-standard.com