On Wednesday, Crédit Agricole was included in the list of globally systemically important establishments in category 2. This news gives us the opportunity to take an interest in the establishments that make up this list.
What is a systemically important entity?
Awareness of the need to regulate large financial entities dates back to 2009, in the aftermath of the subprime crisis. The stated objective was to put in place specific supervisory measures to regulate the activities of the largest banks and thus limit the risks they pose to the financial sector and the economy as a whole if they go bankrupt. This is why they are described as “too big to fail”, that is, too big for the public authorities to abandon them to their fate in the event of serious difficulties.
What methodology to classify them?
A score between 1 and 5 is assigned to each systemic bank; 5 being the score of entities considered to present the highest risk. This score is obtained on the basis of a set of quantitative criteria such as size, interconnection with other institutions, degree of internationalization, complexity and the specific nature of the activities (retail banking, lending solutions, investment banking, trading, etc.).
The list according to the different criteria. The “Overall” column gives an overall score (source: BIS)
What you can see:
- No institution is categorized as risk 5.
- 29 banks are categorized as systemic: 14 in risk 1; 12 in risk 2: 2 in risk 3 and 1 in risk 4.
- Geographically, the 29 banks are distributed as follows: 8 American; 5 Chinese; 4 French; 3 Japanese; 3 British; 2 Canadian; 1 Swiss; 1 Dutch; 1 German; 1 Spanish.
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