Last update: 01/12/2023
Santander's listing as a Global Systemically Important Bank speaks to its influence in the international financial system.
Santander is the only Spanish bank to feature on the list of 29 global systemically important banks (G-SIBs) for 2023. Since 2011, the Financial Stability Board (FSB), Basel Committee and national authorities have revised the list each year.
Systemic bank status carries additional capital requirements for banks to cover the risk attributed to their size in the financial system. The list of G-SIBs is divided into categories based on the higher loss absorbency of common capital requirement.
Because of the financial crisis that began in 2007, so many banks went bankrupt or faced financial decline that the public sector had to step in to restore financial stability — at taxpayers’ expense.
It became clear that additional measures were needed to reduce both the likelihood and the severity of financial institutions going broke. The Basel Committee on Banking Supervision (BCBS) adopted reforms to make banks and the banking system in general more resilient. It introduced new policies for systemically important institutions so that their problems wouldn't spill over to other banks, and they wouldn't likely take excessive risk, subvert market discipline in hopes of a government bailout and, in consequence, distort the market and require a bailout in the future.
The Basel Committee came up with a methodology to identify G-SIBs based on equally-weighted categories:
The highest scoring banks are classified as G-SIBs.
Given G-SIBs' weight in the financial system, they must meet extra requirements to reduce:
G-SIBs are subject to tighter supervision. They also have additional capital and loss-absorbing requirements and must undergo a resolvability review by international authorities. This review, coupled with the resolution plan, protects G-SIBs' critical functions and customers in times of crisis.
That's why Santander must abide by more stringent rules than non-systemic banks and is better equipped to cope with crisis.
G-SIBs' additional capital requirements can be between 1% and 2.5% of CET1 capital depending on their level of systemic importance.
Santander finds itself at the lower end of this range. It is equivalent to a capital buffer of 1% of our total risk exposure in 2023.