Related News
New rules shield taxpayers in bank failures
GLOBAL regulators yesterday proposed new rules to ensure that bank creditors rather than taxpayers pick up the bill when a big lender collapses.
Mark Carney, chairman of the Financial Stability Board and Bank of England governor, said the plans marked a watershed in ending banks that are too big to be allowed to fail.
“Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved (wound down) without recourse to public subsidy and without disruption to the wider financial system,” Carney said in a statement.
After the financial crisis in 2007-2009, governments had to spend billions of dollars of taxpayer money to rescue banks that ran into trouble and could have threatened the global financial system if allowed to go under.
Since then, regulators from the Group of 20 economies have been trying to find ways to prevent this happening again.
The plans envisage that global banks like Goldman Sachs and HSBC should have a buffer of bonds or equity equivalent to at least 16 to 20 percent of their risk-weighted assets, like loans, from January 2019.
These bonds would be converted to equity to help shore up a stricken bank. The banks’ total buffer would include the minimum mandatory core capital requirements they must already hold to bolster their defences against future crises.
The new rule will apply to 30 banks the regulators have deemed to be globally “systemically important,” though initially three from China on that list of 30 would be exempt.
G20 leaders are expected to back the proposal later this week in Australia. It is being put out to public consultation until February 2, 2015.
Carney was confident the new rule would be applied as central banks and governments had a hand in drafting them.
“This isn’t something that we cooked up in Basel tower and are just presenting to everybody,” he told a news conference, referring to the FSB’s headquarters in Switzerland.
Breaches should be punished by curbing dividends and bonuses, the FSB said.
Most of the banks would need to sell more bonds to comply with the new rules, the FSB said. Some bonds — known as “senior debt” — that banks have already sold to investors would need restructuring.
Senior debt was largely protected during the financial crisis, which meant investors did not lose their money. But Carney said in future these bonds might have to bear losses if allowed under national rules and investors were warned in advance.
The new buffer, formally known as total loss absorbing capacity or TLAC, must be at least twice a bank’s leverage ratio, a separate measure of capital to total assets regardless of the level of risk.
Globally, the leverage ratio has been set provisionally at 3 percent but it could be higher when finalized in 2015.
Some of the buffer must be held at major overseas subsidiaries to reassure regulators outside a bank’s home country.
- About Us
- |
- Terms of Use
- |
-
RSS
- |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 娌狪CP璇侊細娌狪CP澶05050403鍙-1
- |
- 浜掕仈缃戞柊闂讳俊鎭湇鍔¤鍙瘉锛31120180004
- |
- 缃戠粶瑙嗗惉璁稿彲璇侊細0909346
- |
- 骞挎挱鐢佃鑺傜洰鍒朵綔璁稿彲璇侊細娌瓧绗354鍙
- |
- 澧炲肩數淇′笟鍔$粡钀ヨ鍙瘉锛氭勃B2-20120012
Copyright 漏 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.