RBS and HSBC to be ordered to hold extra insurance

Royal Bank of Scotland and HSBC are among a top tier of international banks whose failure would be most dangerous for the global financial system, it has been revealed.

The two banks – along with Citigroup and JPMorgan Chase of the US and BNP Paribas of France – will be forced to hold an additional 2.5 per cent of their assets as a capital cushion to absorb losses and protect against a market meltdown, according to a provisional list compiled by the Basel Committee on Banking Supervision.

The names of 29 global banks that will be required to hold additional capital was approved and published at the G20 meeting last week, but the different levels of risk associated with each bank was not. The 29 will be forced to hold between 1 and 2.5 percentage points on top of the 7 per cent capital requirement, with the number based on their interconnectedness with other institutions, their size, complexity and global reach, and the ability of other banks quickly to take over their functions if they collapse.

Barclays of the UK, Bank of America of the US and Germany's Deutsche Bank would be forced to hold an additional 2 per cent. The investment banking giant Goldman Sachs is on 1.5 per cent. The requirements do not kick in until 2016 and will be revised before then.