Bank of England Governor Mark Carney has warned the world’s biggest banks will have to have even bigger capital buffers against failure, so that the taxpayer never again has to bail them out.
Carney, head of the global Financial Stability Board, said: “No banker likes to say it, but they get subsidies from the public. Banks worked on a ‘heads we win, tails you lose basis’.”
He said the planned new rules, which will require the biggest 30 banks to hold so-called total loss-absorbing capital equivalent to up to 25 per cent of their risk-weighted assets, were a “watershed in ending ‘too big to fail’ banks”.
Analysts said the proposed new rules, which will be discussed at next month’s G20 leaders’ meeting, could cost the banks hundreds of millions as they are likely have to raise extra, more expensive, debt. The rules will come in from 2019 at the earliest.
Barclays, HSBC, Standard Chartered and Royal Bank of Scotland are all on the FSB’s list of the world’s most systemically important banks. Others include J P Morgan, Citibank and BNP Paribas.
The FSB said that the new rules could mean that the banks covered by them have less to pay both in bonuses to bankers and dividends to shareholders, as they build up their capital.
The FSB’s stretching capital demands come at a time when banks are still paying out billions for mis-selling and market rigging scandals.
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Six banks are poised to agree a £1.5 billion to £2 billion settlement with the Financial Conduct Authority over allegations that they rigged the £3 trillion-a-day foreign exchange market.
Barclays, Citigroup, HSBC, RBS, J P Morgan and UBS are in final negotiations with the City watchdog, with a deal expected as early as this week or next. But the banks still face huge penalties from US and other global regulators, who are also investigating their roles in the forex market.Reuse content