Sunday, 6 November 2011

Top British banks 'would fail safety tests'

Four British banks and 17 in total from the EuroZone would not pass a 'too-big-to-fail' test.

The Financial Stability Board identified 29 banks,including Royal Bank of Scotland, HSBC, Lloyds and Barclays, so important to the world's financial system that they require more capital and closer surveillance than rivals, plus a detailed plan to allow them to be wound up without taxpayer help if they hit trouble.

One of the things agreed at the G20 summit in Cannes was a core capital requirement surcharge starting at 1 percent of risk-weighted assets and rising to 2.5 percent for the biggest banks,which would be phased in over three years from 2016.

Banks likely to need a 2.5 percent capital surcharge are Citigroup, HSBC , JPMorgan, BNP Paribas and Royal Bank of Scotland , according to a preliminary assessment according to a bank industry source,whilst Bank of America , Barclays and Deutsche Bank will be in the 2 percent category.

The implications for the banks named are that they must carry out far-reaching changes to prove that they will not have to be supported by the state if they do near collapse.

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