Domestic systemically important banks
Domestic systemically important banks are essential to a country’s financial system or economy. If one of these banks fails or experiences distress, it could disrupt the country’s operation.
Identifying domestic systemically important banks
The Basel Committee on Banking Supervision has a set of principles on how to assess the requirements for banks of this type. This methodology groups the bank-specific indicators into 4 categories:
- Size – how big is its share of domestic banking activity
- Substitutability – how easily can it be replaced as a market participant and financial service provider
- Complexity – how many different services does it offer
- Interconnectedness – how connected is it to other financial institutions
Canada’s domestic systemically important banks
Canada has 6 domestic systemically important banks:
- Bank of Montreal
- Bank of Nova Scotia
- Canadian Imperial Bank of Commerce
- National Bank of Canada
- Royal Bank of Canada
- Toronto-Dominion Bank
Royal Bank of Canada and Toronto-Dominion Bank are also considered global systemically important banks.
These banks have stricter requirements than others in Canada, including:
- capital absorbency (for example, the domestic stability buffer applies to these banks)
- disclosure
- supervisory expectations
This higher level of supervision helps to ensure that these banks remain sound and healthy to protect the Canadian financial system.
For more information on domestic systemic importance, see Annex 1 of our Capital Adequacy Requirements Guideline Chapter 1 – Overview of Risk-based Capital Requirements.