International Regulators Agree on Extra Capital Rules for Banks

Global banks that are considered "too big to fail" will be required to hold between 1% and 2.5% of extra capital as a percentage of their "risk-weighted assets." That is in addition to a base 7% capital requirement for all banks that international policy makers agreed to last year.

 

Regulators hope the new rules, which will be implemented gradually over the next seven years, will discourage bankers from imprudent risk taking and ensure that giant institutions can absorb sudden losses without imperiling the global financial system or requiring taxpayer bailouts, says the Wall Street Journal.

 

The rules also impose an additional 1% capital requirement on giant banks that grow bigger. The goal, the regulators said in a statement, is "to provide a disincentive for banks facing the highest charge to increase materially their global systemic importance in the future."

 

The industry argues that the regulations are overkill and could stymie economic growth, says the Journal.

 

The Basel committee said it would issue full details of its proposed package of rules in late July, at which point the plans will be open for public comment. The goal is for a final version to be ironed out by the planned meeting of leaders from the Group of 20 nations in the French city of Cannes in early November.

 

 

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