Thursday, November 1, 2012

Global Regulators to Cut List of Too-Big-To-Fail Banks to 28


Global regulators will publish a list of 28 too-big-to-fail banks that must hold additional capital, a German government official said. That is one less than the 29 identified last year.
The list will be published today in advance of a Nov. 4 meeting in Mexico of finance officials from the world’s biggest economies, the German official told reporters in Berlin on condition of anonymity because the G-20 negotiations are private.
The Financial Stability Board last year published a list of 29 banks that should hold more capital than required by other international agreements because of their importance to the global financial system. Citigroup Inc. (C), JPMorgan Chase & Co., BNP Paribas SA (BNP), Royal Bank of Scotland Group Plc, and HSBC Holdings Plc (HSBA) were provisionally earmarked to face the top level of surcharges, set at 2.5 percent of risk-weighted assets.
“I think there is general agreement around the world that increasing capital requirements has a negative effect on the economy and delays the recovery,” Simon Gleeson, financial regulation partner at Clifford Chance LLP, said in a telephone interview today. “It’s a question of calibration.”
The most likely bank to drop off the updated list is Dexia SA (DEXB), the Franco-Belgian lender that is being broken up after losing access to unsecured funding, Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels, said last month.

G-20 Nations

The FSB said last year that regulators would update the list on an annual basis, with each revision to be published in November. The FSB brings together central bankers, regulators and government officials from G-20 nations to coordinate financial rulemaking.
The capital surcharges for systemic banks, ranging from 1 percent to 2.5 percent, come on top of agreements by the Basel Committee on Banking Supervision to more than triple the core reserves that lenders have to hold against possible losses. These so-called Basel III rules are intended to apply to all internationally active banks, and are scheduled to fully apply from 2019.
Large international lenders would have faced a 374.1 billion euro shortfall ($484.4 billion) in the capital needed to meet Basel III had it been in force at the end of 2011, according to data published by the Basel group in September. The figure factors in the surcharges for globally systemic banks. . . .

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