Question: Consider the following statements :-
- Economically important banks are those whose total assets are more than 2% of the national gross domestic product (GDP).
- SBI, ICICI and HDFC Bank will continue to be identified as domestic systemically important banks.
Which of the above statements is/are correct?
(a) 1 only
(b) 2 only
(c) 1 and 2
(d) neither 1 nor 2
Answer—(c)
Related facts—
- RBI on January 2022 said state-owned SBI, along with ICICI Bank and HDFC Bank continue to be Domestic Systemically Important Banks (D-SIBs) or institutions which are ‘too big to fail’.
- SIBs are perceived as banks that are ‘too big to fail (TBTF)’.
- This perception of TBTF creates an expectation of government support for these banks in times of distress. Due to this perception, these lenders enjoy certain advantages in the funding markets.
- It is notable that framework for dealing with D-SIBs was issued in July 2014.