Central bankers agree on bank capital surcharge plan

 

By Huw Jones, Reuters June 25, 2011

BASEL, Switzerland/LONDON June 25 (Reuters) - Global banking regulators have agreed on a proposal to slap an extra capital charge on the world's biggest banks to make them safer by 2019.

The surcharge is part of a series of regulatory reforms launched in response to the financial crisis, which forced countries worldwide into costly bailouts of their banking sectors to prevent systemic collapses.

The Group of Governors and Heads of Supervision (GHOS) said after a meeting in Basel on Saturday the proposal would be put out to public consultation next month.

"The additional loss absorbency requirements are to be met with progressive common equity tier 1 capital requirement ranging from 1 per cent to 2.5 per cent, depending on a bank's systemic importance," the group said in a statement.

An additional 1 per cent surcharge would also be imposed if a bank becomes significantly bigger, pushing the total to 3.5 per cent.

The plans, which need approval from world leaders (G20) in November, would be phased in between Jan. 1 2016 and end of 2018.

The capital surcharge will come on top of the new 7 per cent minimum core capital all banks across the world will have to hold under new Basel III rules being phased in over six years from 2013.

However, many of the world's biggest banks already hold core tier 1 capital ratios of 10 per cent or more and therefore easily meet or exceed the top end of the surcharge band.

The central bankers have opted for a smaller surcharge than forseen but, in return, the surcharge will have to be in the form of top quality capital — retained earnings or common equity.

This marks a victory for hardline countries such as Britain and the United States but will disappoint some banks that have been hoping to use hybrid debt such as contingent capital to pad out the surcharge band.

COCOS REVIEWED

The proposal, which was due to be finalized by last November but faced opposition from banks and some countries, will apply initially to so-called globally systemically important banks (G-SIBs).

"These measures will strengthen the resilience of G-SIBs and create strong incentives for them to reduce their systemic importance over time," the statement said.

The consultation paper in July will indicate how many banks face a capital surcharge but it is not clear yet if their names will be published.

The number of banks affected is likely to change over time as lenders grow or shrink and the consultation will spell out how often a snapshot of the sector will be taken.

Banks will face a surcharge according to an indicator that draws on five elements — size, interconnectedness, lack of substitutability, global (cross-jurisdictional) activity, and complexity.

The group of central bankers and the Basel Committee it oversees said they will continue to review the use of contingent capital (CoCos).

The central bankers said they would support the use of contingent capital to meet higher national requirements than the global minimum surcharge.

However, even then, there would have to be a high-trigger for converting the debt into equity to help absorb losses on a going concern basis, the central bankers said.

Views: 52

Comment

You need to be a member of 12160 Social Network to add comments!

Join 12160 Social Network

"Destroying the New World Order"

TOP CONTENT THIS WEEK

THANK YOU FOR SUPPORTING THE SITE!

mobile page

12160.info/m

12160 Administrators

 

Latest Activity

Doc Vega posted a blog post

When Will the True Reparations Be Awarded?

Americans have weathered the worst storm perhaps in American history from an intentionally…See More
4 hours ago
MAC posted videos
yesterday
tjdavis posted photos
Tuesday
Doc Vega posted photos
Monday
Doc Vega posted a blog post

Veteran’s Day a Time That Should Be Honored

 At a time in our confusing and idiotic history when a Democrat can’t define a woman when being…See More
Monday
Michael A. Pinson posted a photo
Monday
cheeki kea commented on tjdavis's blog post Mountain Miracle
"Thumbs up to this awesome school. Isn't it amazing that some of the greatest teachers are to…"
Sunday
cheeki kea commented on cheeki kea's photo
Sunday
cheeki kea commented on Doc Vega's blog post This is Incredible! Trump is Already releasing Plans to Dismantle the Deep State and Purge the Corrupt Players
"Oh wow he is not wasting any time. May the power of the words he just spoke resonate across America…"
Sunday
tjdavis favorited cheeki kea's video
Sunday
tjdavis favorited rlionhearted_3's photo
Sunday
tjdavis posted a blog post
Sunday
Doc Vega's 4 blog posts were featured
Saturday
cheeki kea's 2 blog posts were featured
Saturday
Doc Vega commented on tjdavis's blog post Mountain Miracle
"A creative way to get hands on participation with students and the community."
Saturday
Doc Vega favorited tjdavis's blog post Mountain Miracle
Saturday
Doc Vega posted a blog post

The Perfect Lies

The Perfect Lies Time is like an ocean with its secrets running deepLike all the lovers you’ve…See More
Saturday
tjdavis posted blog posts
Saturday
tjdavis posted a blog post
Friday
Doc Vega posted blog posts
Nov 7

© 2024   Created by truth.   Powered by

Badges  |  Report an Issue  |  Terms of Service

content and site copyright 12160.info 2007-2019 - all rights reserved. unless otherwise noted