Global regulators plan to institute additional capital requirements for about 30 of the world’s biggest banks, requiring them to carry a particular surcharge based on the bank’s size, global reach, structural complexity, and whether other banks could absorb its business.
This new surcharge is in addition to the ‘Basel III’ international minimum of 7% set by global regulators last year, and at least 8 banks around the world are being targeted for additional capital surcharges totaling 2.5% of their assets, including Citigroup (NYSE:C), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Deutsche Bank (NYSE:DB), HSBC (NYSE:HBC), BNP Paribas (EPA:BNP), Royal Bank of Scotland (NYSE:RBS), and Barclays (NYSE:BCS).
In the next tier down would be Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), UBS (NYSE:UBS), and Credit Suisse (NYSE:CS), all of which would face an addition 2% surcharge on top of the 7% set by Basel III. Another 10 to 15 banks could face additional surcharges ranging between 0.5% and 2%. The new measures apply to the banks most important to the functioning of the economies in which they operate — banks that would likely have to be bailed out by taxpayers if they were to get into trouble. It is intended to make them more resilient and less likely to face a situation like that of 2008.
Regulators will meet in Switzerland late next week to make final decisions. In the meantime, banks are intensely lobbying to keep themselves out of the new top categories, trying to downplay their importance or the amount of business they do so as not to face additional surcharge requirements.