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November 2, 2012

Watchdog Raps Banks Over Risk

 

“The Financial Stability Board, criticizing some of the world’s largest banks for taking only halting steps to curb risk and produce feasible “living wills,” spelled out for the first time the amount of extra capital it would expect them to hold based on the potential risk they pose to the global financial system.

“The FSB, which coordinates the global regulatory response to the financial crisis on behalf of the Group of 20 leading advanced and emerging economies, on Thursday identified Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG  and J.P. Morgan Chase & Co. as the four banks most central to the system, on the basis of 2011 data on their size, interconnectedness and a variety of other criteria.

“It said those four banks should be subject to a capital surcharge of 2.5 percentage points above the statutory minimums laid out in the so-called Basel III accords on bank capital. It said 24 other banks on its list should be subjected to smaller surcharges of between 1% and 2%. Basel III requires banks to hold capital equivalent to at least 7% of their risk-weighted assets to operate freely.”

Read Geoffrey Smith’s full Wall Street Journal article here

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