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Regulators lay out plan to end 'Too-Big-To-Fail' 

November 12, 2014
Geoffrey Smith, Fortune

The world’s biggest banks will have to hold at least twice as much loss-absorbing capital as smaller ones.

The world’s banking regulators unveiled at the weekend their last great plan for ending the phenomenon of banks that are ‘too-big-to-fail’, proposing that the most important institutions should carry at least as much as capital as other banks to ensure that taxpayers don’t ever have to rescue them again.

The Financial Stability Board, which coordinates the global regulatory response to the 2008 financial crisis on behalf of the Group of 20 major economies, said that Global Systemically Important Banks, or G-SIBs, should in future have to hold loss-absorbing capital equivalent to between 16%-20% of their total assets, adjusted for risk.

That’s more than double the 8% ratio that was prescribed in the so-called “Basel III” accords in 2011, which are being phased in around the world by 2018. The actual ratio required may even be higher than the basic range of 16%-20% range, as the plan allows national regulators to add on further capital charges if they deem it necessary.

Read more: Fortune

 
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