CANNES, France, November 4 (Global Risk Regulator) – Global banking regulators listed 29 banks today deemed to be 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 named at the Group of 20 (G20) summit in the French Mediterranean resort of Cannes, 17 are from Europe, eight are US banks, including Goldman Sachs, JP Morgan and Citigroup, and just four from Asia, including Bank of China.
The list was issued at the end of the two-day meeting of the leaders of the world’s largest economies that’s been overshadowed, even hi-jacked, by the eurozone debt crisis and its attendant political turmoil in Greece. The raging eurozone crisis considerably obscured the fact that one of the main purposes of the summit was to review and endorse the great raft of financial reform and regulation developed under the aegis of the Financial Stability Board (FSB), the body coordinating the implementation of the G20 reform package. The idea is to strengthen the global financial system in the wake of the 2007-09 financial crisis.
The G20 endorsed a core capital requirement surcharge starting at 1% of risk-weighted assets and rising to 2.5% t 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.
The 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 FSB secretary general Svein Andresen as reported by Reuters news agency. He said a top level additional capital requirement of 3.5% 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.
The surcharge requirement comes on top of new Basel III rules imposing a 7% minimum core capital buffer for all banks.
Outgoing FSB chairman Mario Draghi dismissed criticism that tougher capital rules could force big banks to curtail lending just as a fragile global economy still totters on the brink of recession.
“We have several studies of the Basel III regulation introduction and they don