International regulatory authorities have identified 29 banks which have systemic importance for global financial system and will be required to hold higher capital reserves of 1 to 2.5 percentage points more than other credit institutions , according to AFP. Among the banks mentioned at the G20 meeting in Cannes, 17 are from Europe, 8 from the United States and four from Asia, a statement of the Financial Stability Fund (FSF) reads. Some banks are already required in the European Union to reach a capital adequacy ratio of 9% until June 30, 2012, according to the agreement in Brussels last week. According to estimates of European Banking Authority, the banks will need additional capital of 106 billion euros.
Some of the systemically important European banks are from France: BNP Paribas, Credit Agricole, Societe Generale and BPCE, which were already pointed out by President Nicolas Sarkozy. German banks Deutsche Bank and Commerzbank are also on the list. Four other banks are in the UK, including HSBC Holdings and Royal Bank of Scotland Group. The list also includes ING Europe (Netherlands), Banco Santander (Spain), UniCredit (Italy) and UBS (Switzerland). Goldman Sachs, JP Morgan and Citigroup are among U.S. banks announced, and the list of credit institutions in Asia include Bank of China.The list is not definitive, but will be updated annually and published in November each year.
The list included now only banks, but it is possible that in the future will include other financial companies. These banks, whose failure may affect the entire economy, will be required at the end of 2012 to comply with a special operations removal regime in the event of difficulties. The decision to increase the adequacy rate was approved by G20 together with measures to ensure the orderly dismantling of failing banks and to protect taxpayers’ costs.
Among these measures is the right of regulators to impose losses to unsecured creditors of banks affected by the crisis. Regulators will thus avoid a repetition of the drama occurred during the financial crisis, when the collapse of Lehman Brothers in 2008 caused an earthquake in the world economy. “The great lesson of the crisis was that the world needs a system for removal of financial institutions, regardless of size, if they have problems”, said FSF chairman Mario Draghi. Once the recommendations will become law, these rules will give national authorities the power to intervene quickly and decisively “to dismantle in an orderly manner a systemically important company in bankrupcy”, said Draghi, who became president, on November 1, of European Central Bank.
Regulators imposed last year to all banks, through Basel III international rules, a capital adequacy rate of 7%, as opposed to the previous minimum of only 2%. The requirements of additional capital will be met gradually during 2016-2018. Banks that will not meet the new rules will be subject to restrictions on dividend payments and bonuses.