Systemically Important Banks Layered Reshuffle: Who is Moving Up, Who is Moving Down?

On February 13, the People’s Bank of China and the China Banking and Insurance Regulatory Commission jointly released the list of systemically important banks (D-SIBs) for 2025. Compared to the 2023 list, the number of designated institutions increased from 20 to 21, with Zhejiang Commercial Bank as a “new face” making its first appearance. All mainstream joint-stock commercial banks are now included within the regulatory scope.

Source: People’s Bank of China. Illustration: Doubao AI

However, the expansion of the list does not conceal the intense reshuffling behind the scenes: the joint-stock bank Industrial Bank, which ranked third in the previous round, has been downgraded to the second group in this assessment, making it one of the banks that experienced a “downgrade.” Under the combined influence of macroprudential management and microprudential supervision, this list not only delineates the boundaries of “too big to fail” but also reflects regulators’ re-pricing of the systemic risk profiles of different banks.

Source: People’s Bank of China. Illustration: Doubao AI

Zhejiang Commercial Bank Advances

The fourth group remains dominated by the Big Four: Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank. As the backbone of the national financial system, their systemic importance scores are far ahead, bearing the highest regulatory standards. The third group includes Bank of Communications and China Merchants Bank, which maintain advantages in cross-regional operations, financial market activities, and customer coverage. The second group, after adding Industrial Bank, now comprises four banks: CITIC Bank, Shanghai Pudong Development Bank, Postal Savings Bank, and Industrial Bank.

Zhejiang Commercial Bank has been classified into the first group, alongside Minsheng Bank, China Everbright Bank, Ping An Bank, Huaxia Bank, and other leading city commercial banks such as Ningbo Bank and Jiangsu Bank. This indicates that, under the quantitative model of the “Systemically Important Bank Evaluation Measures,” Zhejiang Commercial Bank’s scores in the four key dimensions—size, interconnectedness, substitutability, and complexity—finally crossed the threshold.

From a data perspective, Zhejiang Commercial Bank’s promotion is not accidental. As of the third quarter of 2025, the bank’s total assets reached 3.39 trillion yuan. Although still at the lower end among joint-stock banks, its core Tier 1 capital adequacy ratio increased countercyclically by 0.02 percentage points year-over-year to 8.40%. With Zhejiang Commercial Bank’s inclusion, the number of major nationwide joint-stock commercial banks classified as systemically important in China has reached 10 for the first time. The only joint-stock banks not yet included are Hengfeng Bank and Bohai Bank.

A source close to regulators once told the media that the assessment of systemically important banks is not simply a matter of “asset size ranking,” but a measure of an institution’s “contagion capacity” within the financial system. Zhejiang Commercial Bank’s recent focus on cross-border business, financial derivatives, and complex credit structures may have contributed to higher scores in the “complexity” indicator.

Industrial Bank Downgraded from the Third Group

Contrasting with Zhejiang Commercial Bank’s promotion is the change in Industrial Bank’s position.

In the 2023 list, Industrial Bank was in the third group along with Bank of Communications and China Merchants Bank. However, in the 2025 list, it has been adjusted to the second group, alongside CITIC Bank, Shanghai Pudong Development Bank, and Postal Savings Bank. This is one of the few banks to experience a “downgrade” since the first list of systemically important banks was published in 2021.

From a regulatory perspective, a downgrade in group classification means a direct reduction in regulatory costs. According to the “Regulations on Additional Capital Requirements for Systemically Important Banks (Trial),” third-group banks are required to hold an additional capital requirement of 0.75%, while second-group banks need only 0.5%. For a bank like Industrial Bank, with nearly 10 trillion yuan in assets, this 0.25 percentage point reduction in additional capital requirement frees up hundreds of billions of yuan in capital space.

In recent years, although Industrial Bank has been known for its “commercial + investment banking” strategy, structural changes in financial markets and its relative advantages in interbank and financial market activities may have been diluted as other banks have caught up. Looking back at the 2022 list adjustment, Minsheng Bank was moved from the second to the first group, which was interpreted as a regulatory re-evaluation of its systemic importance. Now, the downgrade of Industrial Bank again confirms a key point: the list of systemically important banks is not a lifetime designation but a “dynamic seat.”

Regulatory Logic in a Dynamic Framework

The release of this list comes nearly a year and a half after the previous one. Unlike the continuous releases in 2021, 2022, and 2023, there was a gap in 2024. This change in rhythm is related to the redefinition of regulatory responsibilities following the establishment of the China Banking and Insurance Regulatory Commission in 2023, and also reflects regulators’ cautious approach to data evaluation.

The People’s Bank of China and the China Banking and Insurance Regulatory Commission emphasized in their announcement that they will “play the combined role of macroprudential management and microprudential supervision to continuously strengthen the additional regulation of systemically important banks.” Behind this statement are two deeply integrated regulatory logics. Macroprudential management focuses on systemic risk and aims to prevent moral hazard from “too big to fail,” while microprudential supervision concentrates on individual institutions’ governance, asset quality, and capital adequacy.

For the 21 systemically important banks, they must meet not only micro-level indicators such as non-performing loan ratios and reserve coverage but also macro-level “over-criteria” requirements such as additional capital, leverage ratios, and total loss-absorbing capacity (TLAC). According to regulations, banks in the first to fifth groups are subject to additional capital requirements of 0.25%, 0.5%, 0.75%, 1%, and 1.5%, respectively, and must also meet additional leverage ratio requirements—50% of the additional capital requirement, satisfied by Tier 1 capital.

It is noteworthy that the fifth group in this list still has “no banks entered.” The additional capital requirement for the fifth group is 1.5%, which is among the highest in the global systemically important banks (G-SIBs). Although the Big Four—ICBC, ABC, BOC, and CCB—have been included in the Financial Stability Board’s (FSB) global systemically important banks list for several years, and ICBC has moved into the third group in 2025, no bank in China has yet entered the 1.5% additional capital deep zone under the domestic assessment system.

Every adjustment to the list of systemically important banks is not just a ranking change but a precise scan of the vulnerabilities in the financial system. Zhejiang Commercial Bank’s rise demonstrates that small and medium-sized banks can achieve systemic status through deepening functions; Industrial Bank’s downgrade shows that “big” does not necessarily mean “key.” In this layered reshuffle, there are no eternal winners—only participants who continuously adapt to regulatory logic and market realities.