Banks to stock up cash reserves
(28 June 2010 – Global) The world’s banks will be required to hold enough capital to endure another global financial crisis without relying on taxpayers to bail them out.
Despite the G20’s new tough capital requirements banks will be given a grace period on implementation for fears that a steep rise in the amount of capital they hold could halt the economic recovery.
The G20 said when announcing the implementation of the changes that ‘the amount of capital will be significantly higher and the quality of capital will be significantly improved when the new reforms are fully implemented.’
The global group also said that full information of the changes including a timetable for the transition to the new system will be revealed at the next meeting held in Seoul over November 11-12.
Earlier this month the Institute of International Finance said that in order to meet the proposed requirements by the Basle Committee on Banking Supervision, which is assisting the G20 in compiling the rules, banks would need to raise US$700 billion (A$801 billion) in new capital and sell a net US$5.4 trillion in long-term debt.
However, the institute warned that the changes could reduce GDP in the US, Europe and Japan by 3.1 percent, therefore jeopardising 9.7 million new jobs as bank tighten lending to conserve funds.
Britain’s Chancellor George Osborne said that the new requirements were a ‘significant step forward’ to ending the uncertainty banks faced over their financial future.
The G20 said when announcing the implementation of the changes that ‘the amount of capital will be significantly higher and the quality of capital will be significantly improved when the new reforms are fully implemented.’
The global group also said that full information of the changes including a timetable for the transition to the new system will be revealed at the next meeting held in Seoul over November 11-12.
Earlier this month the Institute of International Finance said that in order to meet the proposed requirements by the Basle Committee on Banking Supervision, which is assisting the G20 in compiling the rules, banks would need to raise US$700 billion (A$801 billion) in new capital and sell a net US$5.4 trillion in long-term debt.
However, the institute warned that the changes could reduce GDP in the US, Europe and Japan by 3.1 percent, therefore jeopardising 9.7 million new jobs as bank tighten lending to conserve funds.
Britain’s Chancellor George Osborne said that the new requirements were a ‘significant step forward’ to ending the uncertainty banks faced over their financial future.
Subscribe