Banking Crisis

Some Of The World's Biggest Banks Face Capital Surcharge Increase

Tom Burroughes , Group Editor, London , 9 November 2011

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Citigroup, JPMorgan, BNP Paribas, Royal Bank of Scotland and HSBC - all of which engage in private banking - may face capital surcharges of 2.5 percentage points, Bloomberg reports, citing a provisional list prepared by global regulators.

The list is part of attempts by Group of 20 nations, which met in Cannes, France, last week, to force large banks to increase capital reserves by 1 to 2.5 percentage points above minimum levels agreed on by international regulators. The push for higher capital “buffers” comes amid heightened fears about the impact on markets from a possible eurozone debt default.

The news service said Bank of America, Barclays and Deutsche Bank may face surcharges of 2 percentage points.

BofA, Deutsche Bank, BNP Paribas, Citi, RBS, Barclays, HSBC and JP Morgan declined to comment, the news service said.

The Bank for International Settlements, based in Basel, Switzerland, declined to comment when questioned by this publication about the matter. 

The issue of a bank’s financial strength has become a closely watched issue for wealth management clients concerned about the security of their money.

The 2008 financial crisis has seen new international capital rules, known as Basel III as they were drawn up by officials meeting in the Swiss town of that name In the past, Basel capital rules have been criticised for encouraging precisely the kind of off-balance sheet accounting and securitisation of debt that has been associated with the recent financial turmoil.

Last week, the G20 endorsed moves "to address the risks to the global financial system from systemically important financial institutions", according to the Financial Stability Board, the global organisation designed to co-ordinate moves by countries to avoid financial blowups. 

Among the measures were "requirements for additional loss absorption capacity above the Basel III minimum for global systemically important banks", the FSB said. 

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