Watchdogs urge for extra capital
(28 September 2011 – Global) The watchdogs that make up the Basel Committee on Banking Supervision are meeting in Switzerland today to require some of the world’s largest financial institutions to hold extra capital.
The proposal was first made in July aiming to curb risk-taking and ensure the largest banks are able to absorb sudden losses without damaging broader financial systems and avoiding taxpayer bailouts.
The July agreement would require 28 big banks to hold between 1 percent and 2.5 percent of extra capital as a percentage of their 'risk-weighted assets'. The surcharge comes on top of a base 7 percent capital requirement for all banks agreed to by international regulators last year.
The surcharge would require US banks, collectively, to raise an additional US$200 billion (A$202.5 billion) in common equity above the general increased requirements of the committee's so-called Basel III agreement, according to a study by the Clearing House, a large US bank trade group. The group commissioned the study as part of its effort to persuade regulators the surcharge is unnecessary and could damage the industry.
The biggest US banks, such as JPMorgan and Citigroup, have spent months lobbying US policy makers to make significant changes to the capital surcharge proposal or scrap it altogether. They argue the extra surcharge heaped atop already-enhanced capital standards is unnecessary and will hurt the economic recovery.
The July agreement would require 28 big banks to hold between 1 percent and 2.5 percent of extra capital as a percentage of their 'risk-weighted assets'. The surcharge comes on top of a base 7 percent capital requirement for all banks agreed to by international regulators last year.
The surcharge would require US banks, collectively, to raise an additional US$200 billion (A$202.5 billion) in common equity above the general increased requirements of the committee's so-called Basel III agreement, according to a study by the Clearing House, a large US bank trade group. The group commissioned the study as part of its effort to persuade regulators the surcharge is unnecessary and could damage the industry.
The biggest US banks, such as JPMorgan and Citigroup, have spent months lobbying US policy makers to make significant changes to the capital surcharge proposal or scrap it altogether. They argue the extra surcharge heaped atop already-enhanced capital standards is unnecessary and will hurt the economic recovery.
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