How to spot a systemically important bank
The world's biggest banks are subject to a capital add-on, and the same is true of banks that are systemically important at the regional and domestic level; but how will regulators identify the latter? Luis Garcia and Thomas Dohrn of the European Banking Authority explain their proposed approach
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Systemically important banks should be subject to higher capital requirements than others. This is one of the founding principles of the post-crisis regulatory agenda, and taken solely on those terms, is fairly uncontroversial. The difficulties arise when trying to apply it in practice. It requires authorities to make a completely new kind of determination – on what constitutes systemic importance, and whether it should be measured differently at the global
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