The term G-SIB stands for global systemically important bank. Their failure could be nearly catastrophic, triggering a market-wide disruption that could lead to a financial crisis. The systemic importance of a bank or other financial institution depends on the effect that its failure could have on the global financial system. This, in turn, depends on the nature of its activities and the contracts it has entered into with other financial institutions globally.

Things to Remember

• Global Systemically Important Banks (G-SIBs) are institutions whose failure could have a significant negative impact on the global financial system.
• G-SIBs are subject to higher capital requirements and stricter regulatory oversight due to their systemic importance.
• The Financial Stability Board (FSB) identifies and classifies G-SIBs based on criteria such as size, interconnectedness, global activity, complexity, and substitutability.
• G-SIBs are expected to have robust risk management practices and contingency plans in place to mitigate the risks they pose to the financial system.