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Institution joins list of powerful global financial organizations
Yet another Chinese bank has been listed by the Financial Stability Board as too big to fail, underscoring China’s growing significance in the global financial system.
Industrial and Commercial Bank of China Ltd, the country’s biggest bank by assets, has been added to the list of banks identified by the board as systemically important in its latest report published on Tuesday, bringing the overall number from 28 to 29.
Bank of China Ltd was on the list for the third consecutive year since 2011, when the board first published the annual list.
A bank that fails might trigger a financial crisis and is seen by the board as systemically important. Banks on the list are required to have a higher capital buffer to avert any repeat of the 2008 credit freeze.
ICBC had a core capital ratio of 10.48 percent as of June 30, while Bank of China’s was 9.27 percent, both above the 8.5 percent level the China Banking Regulatory Commission requires the nation’s systemically important banks to hold by the end of 2018.
The board is compiling the list in preparation for capital rules scheduled to be phased in starting in 2016.
It brings together banking officials from the Group of 20 nations to coordinate financial rule-making. In November 2011, the board listed the first group of systemically important banks, to be updated each year in November. The board is chaired by Mark Carney, governor of the Bank of England.
ICBC’s addition to the list benefited from the Chinese yuan’s growing internationalization and its own global business expansion.
A report published by the Society for Worldwide Interbank Financial Telecommunication in October shows that the yuan has already overtaken the Swedish krona, the South Korean won and the Russian rouble as the world’s eighth most actively traded currency.