Citigroup Inc. (C), JPMorgan Chase & Co., BNP Paribas SA, Royal Bank of Scotland Group Plc, and HSBC Holdings Plc (HSBA) may face top capital surcharges of 2.5 percentage points, according to a provisional list prepared by global regulators and obtained by Bloomberg News.
The list was drawn up as part of plans by the Group of 20 nations to force banks whose failure could damage the global economy to boost their reserves by 1 to 2.5 percentage points above minimum levels agreed by international regulators. Bank of America Corp. (BAC), Barclays Plc (BARC) and Germany’s biggest bank Deutsche Bank AG (DBK) may face surcharges of 2 percentage points, according to the list.
“You’re saying by virtue of being a bigger bank, you’re going to have to pay for that,” Joseph R. Mason, a finance professor at Louisiana State University in Baton Rouge, said in a telephone interview. “You’re creating an incentive for big banks to hide even more risk to get the surcharge reduced.”
A simplified version of the 29-bank list, which didn’t set out the surcharges individual banks would face, was published by the Financial Stability Board on Nov. 4. Lenders including HSBC and BNP Paribas have warned regulators the plans could cause them to cut lending and support to international trade. Plans for the surcharges were published after approval by G-20 leaders in France.
Provisional List
Regulators have emphasized the current list is provisional and will be repeatedly revised before the surcharges are applied starting in 2016. The list is based on data from the end of 2009 that “may not be sufficiently reliable or complete,” the Basel Committee on Banking Supervision, which drafted the measures, has said. Lenders have already been asked to submit end-of-2010 data for an updated list to be published next year.
Larry DiRita, a Bank of America spokesman, and Deutsche Bank spokesman Ronald Weichert declined to comment. BNP Paribas (BNP), Citi, RBS, Barclays, HSBC and JPMorgan also declined to comment.
Some of the surcharges “will be less meaningful as they will be trumped by local regulation in Europe, especially in countries with supersized banking systems,” Morgan Stanley analysts said in a note published Nov. 6.
Six lenders including Goldman Sachs Group Inc., Morgan Stanley, Bank of New York Mellon Corp., and Groupe Credit Agricole, may face surcharges of 1.5 percentage points, according to the list.
Fifteen Banks
Fifteen banks including Wells Fargo & Co., Societe Generale (GLE) SA, and Dexia SA (DEXB), the French-Belgian lender being broken up after losing access to short-term funding, may all face surcharges of 1 percentage point.
Jeanmarie McFadden, a Morgan Stanley (MS) spokeswoman, declined to comment. Goldman Sachs, Bank of New York Mellon, Credit Agricole, Wells Fargo, Societe Generale and Dexia declined to comment.
The extra requirements are calculated against banks’ interconnectedness, size, complexity, global reach, and the ability of other firms to take over their functions if they fail. Banks’ positioning on the list may also be altered through “supervisory judgment,” the Basel committee has said.
“While banks technically won’t need to be fully compliant” with the rules until 2019, their “ability to deploy capital in the near term will likely remain somewhat of a question mark until local regulators provide clarity on expectations,” analysts from Goldman Sachs said in a note published Nov. 4.
The surcharges will be applied on top of an overhaul of bank-capital requirements that international regulators agreed on last year. Those changes, known as Basel III, will more than triple the core reserves that lenders must hold.
(source: Bloomberg)
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08/11/2011 03:29:29 PM | 