KBW, Nasdaq unveil index tracking global systemically important banks (G-SIBs)

Jul 17th, 2015 | By | Category: ETF and Index News

Keefe Bruyette & Woods (KBW), a specialist financial-sector investment bank, and the index division of exchange operator Nasdaq have teamed up to launch the KBW Nasdaq Global Bank Index. The index is designed to track the performance of those banks designated as global systemically important (G-SIBs) by the Financial Stability Board and Basel Committee on Banking Supervision.

KBW and Nasdaq launch Global Bank Index

The KBW Nasdaq Global Bank Index tracks the performance of the world’s most systemically important banks

The index currently covers 28 banks, accounting for 45% of the global banking universe and $3tn total market-capitalisation. These banks typically operate differently to non G-SIBs and are valued uniquely relative to smaller, non-systemically important banks, justifying the ring-fencing of these institutions within their own index.

The index acts as an important gauge on the health of the global banking sector and is also a suitable basis for index-linked investment products such as exchange-traded funds (ETFs).

“The KBW Nasdaq Global Bank Index is an incredibly important benchmark for market participants who are interested in monitoring the health of international financial institutions,” said Salil Donde, Executive Vice President, Nasdaq Global Information Services.

“The GBKX is a substantial benchmark index, as our research shows global systemically important banks (G-SIBs) trade at a lower valuation than domestic banks, even when adjusting for profitability. This is due to the unique global regulatory structure that G-SIBs operate under that exposes them to additional risks and capital requirements which domestic banks are not restricted by,” said Fred Cannon, Global Director of Research at KBW.

The constituents currently include US institutions such as Bank of America, Citigroup, JP Morgan, Morgan Stanley, State Street, Bank of New York Mellon, Goldman Sachs, and Wells Fargo; European institutions such as Banco Bilbao Vizcaya Argentaria, Santander, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, ING Groep, Nordea Bank, Royal Bank of Scotland, Societe Generale, Standard Chartered, UBS, and Unicredit; and Asian institutions such as Agricultural Bank of China, Bank of China, Industrial and Commercial Bank of China, Mitsubishi UFJ, Mizuho Financial, Sumitomo Mitsui.

The index is equal-weighted and, as of 7th July, has an average yield of 3.14%. It is rebalanced quarterly. While denominated in US dollars, the index offers exposure to the dollar, euro, pound, yen, Swiss franc and Swedish krona. The index comes in two versions: the KBW Nasdaq Global Bank Total Return Index (GBKXT) and the KBW Nasdaq Global Bank Net Total Return Index (GBKXN).

KBW and Nasdaq have collaborated previously to construct indices tracking various financial equity sectors including banking, regional banking, insurance, property and casualty insurance, premium yield REITs and financial-sector dividend-payers.

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