The Financial Stability Board has unveiled new proposals requiring big banks to hold more money to shield taxpayers from having to bail them out in the event of another financial crisis, as was the case in 2008.

The Financial Stability Board has unveiled new proposals requiring big banks to hold more money to shield taxpayers from having to bail them out in the event of another financial crisis, as was the case in 2008.

Mark Carney, chair of the FSB, and governor of the Bank of England, said the agreement on proposals for a common international standard was a “watershed in ending ‘too big to fail’ for banks.”

“Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved without recourse to public subsidy and without disruption to the wider financial system,” Carney said in a statement.

The FSB proposes that global banks will have to hold between 16-20 per cent of their risk-weighted assets in equity from 2019, far bigger than the current required rules. Banks must currently meet an 8 per cent capital requirement under the Basel 3 requirement.

Following the financial crisis, banks around the world were propped up by governments to protect them failing. Even today, the UK government, for example, holds a majority stake in Royal Bank of Scotland and a significant holding in Lloyds Banking Group. It is feared that if a bank is deemed too large to be allowed to crash - pulling down an economy with it - that the managers of the bank will behave less cautiously than they would if it was allowed to fail.

Since then G20 leaders have been looking for ways to prevent the situation happening again. The G20 is expected to vote through the proposal later this week at the summit in Australia.

In early 2015, the FSB will undertake a consultation which will be finalized by the time of the next G20 Leaders’ Summit in 2015.