Domestic Systemically Important Bank: 17 Questions & Answers

Domestic Systemically Important Banks (D-SIBs) are institutions whose failure would severely disrupt the domestic economy, commonly termed Too Big To Fail

Bucket 2

The additional Common Equity Tier 1 (CET1) capital requirement is a prudential buffer mandated for D-SIBs above the standard Basel III capital requirements

The D-SIB list update is an annual regulatory exercise by the RBI to reassess the systemic footprint of major commercial banks

Global Systemically Important Banks (G-SIBs) are massive international institutions.

The additional CET1 requirement is a mandatory capital buffer imposed on D-SIBs, scaled progressively across five buckets to mitigate the risk these massive institutions pose to the financial system

The Systemic Importance Score (SIS) is a composite metric calculated using multiple indicators to quantify the potential damage a bank's failure would inflict on the financial system

Capital adequacy is divided into tiers based on loss-absorbing capacity.

Bucket 3 and Bucket 5

2. Foreign Branches

3. Banking Subsidiaries

4. Financial Subsidiaries (e.g., Mutual Funds)

The "Size" of a bank in systemic risk terms is not just its physical assets or stock value; it represents the absolute total exposure the bank has to the economy, both on and off the balance sheet

The SIS is a relative measure, meaning a bank's score represents its percentage share of the total systemic risk present within the entire sample of large Indian banks