Date
16 January 2017
FSB chairman Mark Carney said the plan will ensure that big banks can fail without placing the rest of the financial system at risk. Photo: Bloomberg
FSB chairman Mark Carney said the plan will ensure that big banks can fail without placing the rest of the financial system at risk. Photo: Bloomberg

Big banks may need to raise up to US$1.19 tln in new securities

Global financial regulators published new rules that could force the world’s biggest banks to raise as much as US$1.19 trillion by 2022 in debt or other securities, which can be used to absorb their losses.

The rules are intended to prevent a repeat of the 2008 financial crisis, when taxpayers had to bail out banks whose collapse would have threatened the financial system, the Wall Street Journal reported.

The plan, published on Monday, was prepared by the Financial Stability Board in Basel, Switzerland.

It is meant to ensure that the world’s biggest lenders maintain sizable financial cushions that can absorb losses as a bank is failing, without threatening a crisis in the entire banking system, the newspaper said.

The new standards seek to ensure that the cost of a giant bank’s failure will be borne by its investors, not taxpayers.

The rules cover the world’s top 30 banks, such as HSBC Holdings Plc, J.P. Morgan Chase & Co. and Deutsche Bank AG, which the FSB classifies as “systemically important”.

“The FSB has agreed [to] a robust global standard so that [systemic banks] can fail without placing the rest of the financial system or public funds at risk of loss,” Mark Carney, governor of the Bank of England and chairman of the FSB, was quoted as saying.

The FSB rule doesn’t have any legal force until it is implemented by regulators in the countries where the affected banks reside, the report said.

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