Higher Reserves Proposed for ‘Too Big to Fail’ Banks
“The chief oversight group of the Basel Committee on Banking Supervision proposed that the world’s largest and most complex banks would need to hold a reserve of high-quality capital of between 1 and 2.5 percent of their assets to cope with any unforeseen losses. That would be on top of their proposed minimum capital levels for all banks, currently set at 7 percent of assets.
Regulators plan to impose the surcharge on a sliding scale, based on several factors including the bank’s size, complexity and the closeness of its ties to other large trading partners around the world.
And in what appears to be a nod to regulators pressing for even higher requirements, the committee proposed an additional surcharge on banks who grow larger or engage in risky activities that would “increase materially” the threat they pose to the financial system. The surcharge could raise the requirement to 3.5 percent of assets.
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But setting aside more capital means that banks also have less money available to lend out — a move that could dampen economic growth and potentially hinder an already anemic global recovery.”
(Via Basel Panel Proposes Higher Reserves for ‘Too Big to Fail’ Banks | NYTimes.com .)
