Central bankers' panel in Switzerland seeks to increase capital cushion at 30 global banks

GENEVA – Thirty of the world’s biggest banks would be required to hold vastly greater capital as a cushion for losses under new rules proposed Monday by a panel of central bankers, regulators and officials.

The new rules put forward by the Basel, Switzerland-based Financial Stability Board were crafted in response to a call from leaders at the Group of 20 summit in Russia in 2013; they would not take effect until 2019 at the earliest. They are meant to prevent a repeat of the 2008 global financial crisis by creating a common international standard for the “total loss-absorbing capacity” of global systemic banks.

The FSB is based at the Bank for International Settlements, a central bank for central banks, and its new rules would apply to the list of 30 “global systemically important banks” that BIS considers too big to fail.

The proposal calls on big banks to hold 16 to 20 per cent of their risk-weighted assets in equity and cancelable debt and “at least twice” the current leverage ratio under the so-called Basel 3 requirement.

That does not include equity for other buffers that some of the banks must hold, which could result in large lenders holding what the proposal calls “combined capital buffers” of about 21 to 25 per cent of the risk-weighted assets.

The next step, the FSB said, is for more study and public input before submitting final rules to G-20 leaders next year.