Guardian: “The governor of the Bank of England has said that policymakers had achieved a “watershed moment” in their attempts to avoid a repeat of the taxpayer bailouts of the banking system six years ago.”
“Mark Carney said new standards being published for banks should ensure they hold enough capital to absorb losses they incur and minimise the impact on financial stability and the need for international bailouts.
“Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved without recourse to public subsidy and without disruption to the wider financial system,” he said on Monday.
Speaking in Basel, Switzerland, in his capacity of chairman of the Financial Stability Board (FSB), Carney was referring to new rules about the amount of capital that must be held by 30 banks designated as “globally systemically important”. Known as G-Sibs, these banks include HSBC and Royal Bank of Scotland and will be required to conform with a new measure of capital intended to cover all their losses in the future.
Carney said: “Agreement on proposals for a common international standard on total loss-absorbing capacity for G-Sibs is a watershed in ending ‘too big to fail’ for banks”.
The proposals, being published before this weekend’s meeting in Brisbane, Australia, were drawn up by the FSB after the G20 meeting in St Petersburg asked for ways to devise a system to avoid future taxpayer bailouts.
The UK used £65bn of taxpayers’ cash to prop up RBS and Lloyds Banking Group and billions more to keep the financial system afloat during the financial crisis. The government has yet to sell off any of its stake in RBS though it has reduced its shareholding in Lloyds.
The FSB said the new standard for total loss absorbing capital – known as TLAC – should “provide home and host authorities with confidence that G-Sibs have sufficient capacity to absorb losses, both before and during resolution, and enable resolution authorities to implement a resolution strategy that minimises any impact on financial stability and ensures the continuity of critical economic function”.
The level which has been set – and will come into force in 2019 assuming it is adopted – is for banks to hold TLAC of 16-20% of their assets when adjusted for risk.”
Future Today
