Please ensure Javascript is enabled for purposes of website accessibility

Here Are the 8 U.S.-Based Global Systemically Important Banks

By John Maxfield - Dec 16, 2016 at 4:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These eight global systemically important banks must hold more capital than their smaller, simpler peers.

Image source: iStock/Thinkstock.

Bigger isn't always better in the banking world.

In the wake of the financial crisis, regulators and lawmakers decided that the nation's biggest banks should be required to hold more capital than their smaller and simpler peers in the regional and community banking spaces. And the eight largest banks in the United States, the so-called global systemically important banks, or GSIB, bear the brunt of the decision.

This is because these banks, such as JPMorgan Chase (JPM 1.66%), Bank of America (BAC 1.09%), Citigroup (C 0.70%), and Goldman Sachs (GS 0.61%), must hold an additional tranche of capital above and beyond what even other very large banks must hold. This is known as the GSIB buffer or surcharge.

Just how much extra capital do these banks have to hold? When the rules were first published two years ago, JPMorgan Chase faced the stiffest penalty, with a 4.5% surcharge relative to its Tier 1 common equity. Citigroup was second at 3.5%. Bank of America and Goldman Sachs rounded out the top four at 3%.

Fortunately for these banks, these thresholds have since declined, due in large part to specific actions taken by the banks to lower their risk profiles and thereby the amount of systemic risk that regulators believe they pose to the economy.

The updated list of U.S.-based global systemically important banks, including their original and current GSIB buffers, can be found in this table:


Current GSIB Buffer

Original GSIB Buffer

JPMorgan Chase






Bank of America



Goldman Sachs



Wells Fargo



Morgan Stanley



State Street



Bank of New York Mellon



Data sources: Financial Stability Board, The Wall Street Journal.

For current or prospective investors in any of these banks, this is something that needs to be taken into account. Most large banks generate half or more of their top lines from borrowing cheaply from depositors and lending the same money out at higher interest rates to businesses and individuals in need of funds. The income from this activity is known as net interest income. And the more a bank can leverage, the more net interest income it can generate.

The higher capital ratios for these banks interfere with this. When a bank has to hold more capital, that means it can't use as much leverage, which is one of the reasons profitability in the industry has fallen so much since before the 2008 crisis. As JPMorgan Chase CEO Jamie Dimon pointed out in his latest shareholder letter (emphasis added): "While we did produce record profits last year, our returns on tangible common equity have been coming down, mostly due to higher capital requirements, higher control costs and low interest rates."

The good news is that most of these banks can make up the difference through economies of scale and the fact that they can borrow much more inexpensively than smaller banks can. At the same time, however, if these capital rules were to be relaxed, which the incoming presidential administration has suggested is a top priority, then there's every reason to believe that the eight U.S.-based global systemically important banks have a lot to gain.

Suffice it to say, this is one reason shares of JPMorgan Chase, Bank of America, Citigroup, and Goldman Sachs have all surged since the presidential election.

John Maxfield owns shares of Bank of America, Goldman Sachs, and Wells Fargo. The Motley Fool owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Citigroup Inc. Stock Quote
Citigroup Inc.
$54.38 (0.70%) $0.38
Bank of America Corporation Stock Quote
Bank of America Corporation
$36.30 (1.09%) $0.39
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
$353.82 (0.61%) $2.14
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$122.13 (1.66%) $1.99

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.