Global Regulators Approve Big Bank Capital Surcharge


The Basel Committee of global regulators has finalised disputed plans to force 28 of the world's top banks to hold up to 2.5 percent in extra capital to bolster their ability to withstand any future global credit crunch.

The additional surcharge, described as "anti-American" by JPMorgan Chase Chief Executive Jamie Dimon, is expected to be given final endorsement at a summit of world leaders (G20) in November.

The committee said there was no change to its original plan for a 1-2.5 percent core common equity buffer, but there would be some tweaks to the criteria used for determining the size of the buffer for individual banks.

This criteria identified 28 banks -- yet to be named -- that would be subject to a surcharge but this figure could change by the time the rules comes into effect.

It is still likely to include major lenders like HSBC , Goldman Sachs and Morgan Stanley .

The surcharge is part of wider efforts to tackle the so-called "too big to fail" banks and avoid taxpayer bailouts again in the next banking crisis.

The implementation start date of January 2016 remains unchanged, the Basel Committee said in a statement at the end of its two-day meeting in the eponymous Swiss town.

The capital surcharge will come on top of the committee's tougher new Basel III global minimum bank capital level of 7 percent that is being phased in from the start of 2013 to the end of 2018.


The committee also agreed to accelerate finalisation of its new global bank liquidity standards so that banks have a clear picture by mid-2013 of the planned liquidity coverage ratio (LCR).

The LCR refers to the amount of cash-like assets in a buffer to withstand a 30-day freeze in funding when the rule is introduced from 2015.

"This accelerated process should provide greater market certainty about the final technical details and calibration of the LCR," the committee said.

"The remainder of the observation period could still be used to ensure that these and any other outstanding issues relating to the LCR are fully addressed."

The committee also discussed comments on its proposal to introduce capital requirements for banks' exposures to clearing houses which are set to handle far more derivatives transactions in coming years as regulators seek to improve transparency and safety.

A final consultation will be held in coming weeks.

The committee also said it has put in place a "rigorous framework" to monitor and review how countries are applying the Basel III framework.

"Moreover, the committee agreed to review the measurement of risk-weighted assets in both the banking book and the trading book, to ensure that the outcomes of the new rules are consistent in practice across banks and jurisdictions," the committee said.