A systemically important financial institution, or SIFI, is a bank, insurer, or other financial company large and interconnected enough that its collapse could set off cascading losses across the economy. The label comes out of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress’s response to the 2008 financial crisis and the bailouts that followed. Firms carrying the designation face heightened supervision, tougher capital and liquidity requirements, annual stress tests, and an obligation to plan for their own failure.
Why the Label Exists
Before 2008, no single regulator watched the financial system as a whole. Agencies supervised individual banks and markets, but nobody tracked how risk was building across all of them at once. When Lehman Brothers failed and AIG nearly did, the damage rippled outward because these firms were counterparties to thousands of other institutions. Credit markets froze, and ordinary businesses lost access to short-term borrowing.
Dodd-Frank responded on two fronts. It created the Financial Stability Oversight Council (FSOC), a body of federal and state regulators charged with spotting threats to financial stability before they turn into crises.1U.S. Department of the Treasury. About the Financial Stability Oversight Council And it imposed enhanced prudential standards on the largest firms. The logic is simple: if a firm’s failure would hurt the entire economy, it needs to be supervised more intensively than a community bank.
How a Firm Becomes a SIFI
There are two paths. Most U.S. SIFIs are banks that meet the international criteria for a Global Systemically Important Bank (G-SIB). The rest, in theory, are non-bank firms designated individually by FSOC.
The G-SIB Score
The G-SIB methodology comes from the Basel Committee on Banking Supervision and is coordinated by the Financial Stability Board (FSB). It scores banks across five categories, each weighted at 20%:2Financial Stability Board. 2025 List of Global Systemically Important Banks (G-SIBs)
- Size, measured by total consolidated assets.
- Interconnectedness, meaning the volume of transactions with other financial institutions.
- Substitutability, or how easily other firms could take over critical services like payments and custody.
- Complexity, driven by derivative portfolios, illiquid assets, and legal structure. The FSB noted that complexity was the largest contributor to score changes in the 2025 assessment.
- Cross-jurisdictional activity, since operating across borders complicates any wind-down.
Banks above a cutoff go into buckets that determine their extra capital requirements. The FSB updates the list every November; the 2025 list contains 29 G-SIBs worldwide.
The FSOC Non-Bank Route
FSOC can designate a non-bank financial company as systemically important by a two-thirds vote of its members, including the Treasury Secretary who chairs it. The Council weighs leverage, off-balance-sheet exposures, interconnections with other major firms, importance as a source of credit, and reliance on short-term funding, among other factors.3eCFR. 12 CFR Part 1310 – Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies
In practice this authority has gone dormant. FSOC has designated only four non-bank firms in the framework’s history — AIG, GE Capital, Prudential Financial, and MetLife — and none of those designations remain in effect.4U.S. Department of the Treasury. Designations No non-bank firm has been designated in over a decade. Under proposed 2025 guidance, FSOC would pursue an entity-specific designation only when the risk cannot be addressed through broader oversight of the activity itself, and would first give the targeted firm a chance to fix the problem.5U.S. Department of the Treasury. Financial Stability Oversight Council Issues Proposed Guidance on Nonbank Financial Company Designations For now, the SIFI label in the United States effectively means the largest banks.
The U.S. Banks in the Program
Eight U.S. banking organizations are currently in the Federal Reserve’s G-SIB supervisory program:6Federal Reserve Board. Global Systemically Important Banks
- JPMorgan Chase & Co.
- Bank of America Corporation
- Citigroup Inc.
- The Goldman Sachs Group, Inc.
- Morgan Stanley
- Wells Fargo & Company
- The Bank of New York Mellon Corporation
- State Street Corporation
These firms face the full suite of enhanced prudential standards under Regulations YY and QQ, covering capital, liquidity, resolution planning, risk management, internal controls, and stress testing.
What Being a SIFI Actually Requires
Dodd-Frank originally applied enhanced standards to every bank holding company with more than $50 billion in assets. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act raised the automatic threshold to $250 billion. Banks between $100 billion and $250 billion may still face some enhanced requirements at the Federal Reserve’s discretion, but the full package applies automatically only to G-SIBs and firms above $250 billion.7Legal Information Institute. 12 CFR Part 252 – Enhanced Prudential Standards (Regulation YY)
A Capital Surcharge
On top of the baseline capital rules that apply to every bank, G-SIBs carry an extra capital surcharge tied to their systemic score. The Federal Reserve takes the higher of two calculation methods; the surcharge ranges from 1.0% to 3.5% or more of risk-weighted assets, depending on the firm’s bucket.8eCFR. 12 CFR 217.403 – GSIB Surcharge JPMorgan Chase faces the highest surcharge among U.S. banks because its scores consistently place it in the top bucket. The surcharge gives firms a direct financial reason to simplify.
Liquidity Buffers
Liquidity requirements force SIFIs to hold enough cash, Treasury securities, and other easily sellable assets to meet obligations during a market crisis without fire sales or emergency borrowing.
A Risk Committee and Chief Risk Officer
Bank holding companies with $50 billion or more in assets must maintain an independent risk committee of the board. It must be chaired by an independent director, include at least one member with experience managing risk at large financial firms, and meet quarterly. These firms must also appoint a chief risk officer who reports directly to both the risk committee and the CEO.9eCFR. 12 CFR Part 252 Subpart C – Risk Committee Requirement for Bank Holding Companies
Annual Stress Tests
The Federal Reserve runs annual supervisory stress tests on banks with $100 billion or more in assets. In 2026, 32 banks are subject to the test.10Federal Reserve Board. 2026 Stress Test Scenarios Each test projects how the bank would perform under a hypothetical severe recession — rising unemployment, falling asset prices, other shocks — and estimates losses, revenues, and resulting capital across a multi-year scenario.11Board of Governors of the Federal Reserve System. 2025 Supervisory Stress Test Methodology – Preface
Banks that come up short face restrictions on dividends and share buybacks until they rebuild capital. The results also feed directly into each bank’s capital requirements for the following year, so weak performance has immediate consequences.
A Living Will
Every large covered banking organization must submit a resolution plan, commonly called a living will, to the Federal Reserve and FDIC. The plan lays out how the firm could be wound down in an orderly way under existing bankruptcy laws, without a government bailout.12Federal Reserve Board. Living Wills (or Resolution Plans)
G-SIBs file full plans every two years. Category II and III banking organizations file every three years. Smaller covered companies submit abbreviated plans on a three-year cycle.13eCFR. 12 CFR 243.4 – Resolution Plan Required Each plan has a public section, posted by the FDIC, and a confidential section with sensitive operational details.14FDIC.gov. FDIC and Financial Regulatory Reform – Title I and IDI Resolution Planning If the regulators find a plan not credible, they can require the firm to simplify operations, divest business lines, or make other structural changes. Mapping out their own failure forces firms to confront their complexity in advance.
The Orderly Liquidation Backstop
Title II of Dodd-Frank created the Orderly Liquidation Authority, a backstop for a failing firm whose collapse through ordinary bankruptcy would threaten the system. Under OLA, the FDIC can step in as receiver and manage the wind-down.15eCFR. 12 CFR Part 380 – Orderly Liquidation Authority OLA has never been used. The living will process is partly designed to keep it that way, by ensuring the largest firms can be resolved through standard bankruptcy instead.