 "Global agreement on bail-in bonds plan")
Global regulators have reached a draft agreement on a rule on stopping banks from being "too big to fail" by requiring them to hold enough equity capital and bonds to avoid taxpayers being called on in a crisis.
The proposed standard is known as total loss absorbency capacity (TLAC) and Bank of England governor Mark Carney - who chairs the global regulatory Financial Services Board (FSB) - has described it as the last major reform after the 2007-09 financial crisis forced governments to shore up lenders.
The rule will apply to nearly all the 30 big banks that the FSB has deemed to be "globally systemic" such as Goldman Sachs, Deutsche Bank and HSBC.
The FSB did not publish details of the agreement, but a source familiar with the deal said it mirrored proposals made at a G20 meeting in Ankara earlier this month.
That would see the two-stage introduction of a buffer of debt from 2019 that can be "bailed in" to raise equity equivalent to 16 per cent of a bank's risk-weighted assets, the source said, rising to 20 per cent from 2022.
The FSB said members supported consistent implementation of the robust minimum standard, adding that the TLAC standard and its timelines would be finalised by the time of the G20 Summit in November.
Separately, the FSB also approved the first version of a similar rule for major insurers, the Higher Loss Absorbency standard, which requires them to hold an extra buffer on top of the basic capital requirements.
The proposed standard is known as total loss absorbency capacity (TLAC) and Bank of England governor Mark Carney - who chairs the global regulatory Financial Services Board (FSB) - has described it as the last major reform after the 2007-09 financial crisis forced governments to shore up lenders.
The rule will apply to nearly all the 30 big banks that the FSB has deemed to be "globally systemic" such as Goldman Sachs, Deutsche Bank and HSBC.
More From This Section
"At today's meeting FSB members discussed the TLAC impact assessments, and agreed the draft final principles and the updated term sheet," the FSB said in a statement late on Friday.
The FSB did not publish details of the agreement, but a source familiar with the deal said it mirrored proposals made at a G20 meeting in Ankara earlier this month.
That would see the two-stage introduction of a buffer of debt from 2019 that can be "bailed in" to raise equity equivalent to 16 per cent of a bank's risk-weighted assets, the source said, rising to 20 per cent from 2022.
The FSB said members supported consistent implementation of the robust minimum standard, adding that the TLAC standard and its timelines would be finalised by the time of the G20 Summit in November.
Separately, the FSB also approved the first version of a similar rule for major insurers, the Higher Loss Absorbency standard, which requires them to hold an extra buffer on top of the basic capital requirements.