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| UPDATE 2-G20 names 29 banks for capital surcharge, recovery plan |
| Cannes, 05.11.2011 |
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| By Daniel Flynn
CANNES, France, Nov 4 (Reuters) - Global regulators on Friday named 29 banks so important to the world's financial system that they require more capital and closer surveillance than rivals, plus a detailed plan to allow them to be wound up without taxpayer help if they hit trouble.
The list of banks drafted by the Financial Stability Board, a regulatory taskforce of the G20, included 17 lenders from Europe, and eight from the United States, including Goldman Sachs , JP Morgan Chase and Citigroup .
Just four of the banks are from Asia, including Bank of China , because the region's banks were generally judged to be less complex, have less cross-border links and exposure to wholesale funding, FSB officials said.
A G20 leaders summit 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 FSB did not say which capital bracket each of the 29 banks would fall into.
It continues to tweak the methodology, and will outline the capital categories from November 2012.
Banks likely to need a 2.5 percent capital surcharge are Citigroup, HSBC , JPMorgan, BNP Paribas and Royal Bank of Scotland , according to a preliminary assessment, a bank industry source told Reuters.
Bank of America , Barclays and Deutsche Bank will be in the 2 percent category.
Banks likely to need 1.5 percent extra capital are UBS , Goldman Sachs, Credit Agricole , Credit Suisse , Morgan Stanley and Bank of New York Mellon , the source said.
The remaining 15 banks on the list face a surcharge of 1 percent.
The banks will also have 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 G20's endorsement of these policy measures marks a major milestone," said Mario Draghi, the outgoing chairman of the FSB. "Full and consistent implementation of these policies will ... enable financial institutions at the core of the global system to be resolved without disrupting the real economy and imposing costs on taxpayers."
The list of global systemically important financial institutions -- known by regulators as G-SIFIs -- will be reviewed annually each November.
FSB officials said that, although no banks qualified for this at present, a top level additional capital requirement of 3.5 percent could be imposed on banks as a deterrent to them becoming more systemic.
The requirement surcharge comes on top of new Basel III rules setting 7 percent minimum core capital for all banks.
NEW FSB HEAD
Draghi, who took over as the governor of the European Central Bank this month, dismissed criticism that tougher capital rules could force big banks to curtail lending just as a fragile global economy teeters on the brink of recession.
"We have several studies of the Basel III regulation introduction and they don't show any significant macroeconomic effect coming from the introduction of capital requirements," Draghi told a news conference.
Mark Carney, governor of the Bank of Canada, will be the new head of a reinforced FSB, which will have a strengthened institutional framework, including senior representatives from government treasuries.
Swiss National Bank Chairman Philipp Hildebrand will be named as his deputy, with special responsibility for macroeconomic stability, Draghi said.
The FSB also traced out a new international standard on recovery plans for national regulators to demand, calling for cross-border cooperation on large banks.
Some banks want to see the so-called "living wills".
"We need a regulatory environment where if a bank has a problem the regulators are able to resolve that problem ... without creating systemic risk and without creating hardship on the taxpayers or consumers," Bob Diamond, chief executive of UK bank Barclays, said earlier on Friday. "If we can remove the phrase 'too big to fail' from our lexicon we would feel better."
The new rules, however, have not been universally welcomed. JPMorgan boss Jamie Dimon has called the capital surcharge "anti-American" while big insurers are also battling against being saddled with their own surcharge, as are second-tier banks, for which regulations are being devised.
The world's largest bank by market value, Industrial and Commercial Bank of China , was not included on the G20-backed list. Others just outside included BBVA , Intesa Sanpaolo , Standard Chartered , Nomura and Royal Bank of Canada , the industry source said.
The FSB won G20 backing for plans for tighter regulations of the so-called "shadow banking" sector -- the $60 trillion non-banking financing industry. Regulators want to make it harder and costlier for banks to do business with this sector in a bid to curb risks.
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