G20 names 29 banks for capital surcharge, recovery plan

Fri Nov 4, 2011 11:07am EDT
 
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By Daniel Flynn

CANNES, France (Reuters) - Twenty-nine banks were named on Friday as being so important to the global financial system that they are likely to need to hold more capital than rivals and must put in place a plan to allow them to be wound up without taxpayer help if they hit trouble.

Of the banks listed at the Group of 20 meeting in Cannes, 17 are from Europe, eight are U.S. banks, including Goldman Sachs, JP Morgan and Citigroup, and just four from Asia, including Bank of China.

The G20 endorsed a core capital requirement surcharge starting at 1 percent of risk-weighted assets and rising to 2.5 percent for the biggest banks -- which would be phased in over three years from 2016. The aim is to ensure taxpayers will never again be called on to foot the bill in a major banking crisis.

International industry watchdog the Financial Stability Board (FSB) also said the 29 banks need to meet resolution planning requirements, dubbed "living wills," by the end of next year. National authorities can extend this requirement to other banks at their discretion, it said.

The list of global systemically important financial institutions -- known by regulators as G-SIFIs -- will be reviewed annually each November. The capital buffer will apply to banks identified in November 2014.

"We consider these to be minimum rules," said Svein Andreson, secretary general of the FSB, which has been tasked by the G20 with coordinating the global regulatory response to the financial crisis.

He said a top level additional capital requirement of 3.5 percent could be imposed on banks as a deterrent.

"There are no institutions currently classified as being in that bucket, but it is a disincentive for institutions to become more systemic," Andresen said.   Continued...