“Too big to fail”: Saxo Bank designated as Systemically Important Financial Institution

Saxo Bank has been officially designated as a Systemically Important Financial Institution (SIFI) by the Danish Financial Supervisory Authority (FSA).

A SIFI is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. They are colloquially referred to as “too big to fail”.

“If they’re too big to fail, they’re too big”, said Alan Greenspan

“Too big to fail” is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure.

We saw that theory in practice following the global financial crisis of 2007–2008 as well as earlier this year with the US government intervention of Silicon Valley Bank and Signature Bank.

Critics see the policy as counterproductive and that large banks or other institutions should be left to fail if their risk management is not effective. Some critics, such as former Fed Chair Alan Greenspan, believe that such large organizations should be deliberately broken up: “If they’re too big to fail, they’re too big.”

The company’s role in the financial system is now officially recognized as systemically important, which requires the responsibility of upholding the financial stability and functionality of the financial ecosystem, as well as protecting consumers by adhering to the highest standards.

The SIFI designation categorizes financial institutions that play an important role in ensuring the stability and proper functioning of the financial system.

Saxo Bank supports a growing number of clients, as well as banks, fintechs, brokers, asset managers, and other industry participants who rely on its solidity and stability for their assets and cash as well as its platforms, market facilitation, and advanced technology solutions.

Saxo Bank will adhere to even stricter regulatory and capital requirements

Kim Fournais, CEO & Founder, commented: “We are proud to have built Saxo Bank into a solid institution over the past 30 years. We have done this by focusing on servicing our clients and partners well – and having had success doing so we have now been designated as a Systemically Important Financial Institution by the Danish FSA.

“This is a testament to our strong and resilient business model and the fact that we have succeeded in building a great culture amongst our Saxonians. This is very much thanks to the expertise of our unique employees, as well as the trust and confidence placed in us by our growing number of clients and partners globally, who every day trust us with their assets, cash and use our platforms to trade the global capital markets and be invested in the world.

“It does come with an increased responsibility as Saxo Bank will adhere to even stricter regulatory and capital requirements, which we welcome. We look forward to further strengthening our position as a trusted and vital player in the financial industry, driving positive change, and shaping the future of investing.”

1 million clients and client assets worth USD100 billion

The widely expected milestone had been pre-announced earlier this month when Saxo Bank surpassed 1 million clients and published a press release about it.

Saxo Bank has seen steady growth in the number of clients and assets in the past years, solidifying its position as a leading financial and technology services provider amidst a challenging macroeconomic environment.

The company was recently in the news for crossing the USD 100 billion mark in client assets globally. Saxo Bank offers online trading platforms, investing, and wealth management solutions.

The SIFI designation along with the recent investment grade rating (BBB with a positive outlook) from S&P reaffirms Saxo Bank’s commitment to maintaining a strong financial position and a strategic growth trajectory.