S&P Global: China G-SIBs Scores

Jan 26, 2021

Despite rising global systemic risk scores of Chinese megabanks, their predominantly domestic footprint and the limited overseas use of the yuan suggest a low likelihood of them triggering a Lehman-like global financial crisis in an event of a bank failure, experts say.

The risk scores for global systemically important banks (G-SIBs) in China rose in the latest annual assessment. "Frankly speaking, the linkage between the global financial system and Chinese banks is still relatively limited," Financial Services Partner Hang Qian told S&P Global Market Intelligence. "It's much more meaningful to look at, given the size, how assets on their balance sheet are spread across [jurisdictions]."

"If you look at the balance sheet of these Chinese banks, even though they are big, and that's why they have the systemically important bank status, their global connections are limited," Qian said. "If you look at the U.S. banks that are systemically important, their assets are cutting across multiple jurisdictions … and are still much more systemically important than Chinese banks."

"When the Chinese currency becomes one of the major settlement currencies in the world, almost on par with the U.S. dollar … that's the point when the global economy needs to be much more mindful of that," Qian said. "Hypothetically, assume there's a financial crisis in China, which I have to say is very unlikely … the entire world's supply chain will stop and everything that the world relies on can go to the end. There could be some systematic issues, not through the financial system, but through the real economy."

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