There are 29 banks on this planet that the Financial Stability Board of the Bank for International Settlements says are so important that they must have better protection against collapse.
This list of banks was presented to the G20 meeting in Cannes today says the Telegraph. 17 of the banks are European, four are Asian, and eight are from the USA.
Barclays, HSBC, the Lloyds Banking Group and the Royal Bank of Scotland appear on this role of honour of ‘systemically important’ financial institutions.
All the banks on this list will, under the FSB rules, have to exceed the 7.5% regulatory minimum capital ratio. But there are five systemic risk ‘buckets’. Those in the first and least risky bucket will have to hold an extra 1% capital surcharge, with those in successive buckets having to hold 0.5% more than the one below. At present no bank is assessed as systemically risky enough (that means big enough) to go in the fifth bucket that has a 3.5% surcharge.
Banks will be reassessed by the FSB annually to decide which bucket they should appear in.
The 29 will also have to have ‘living wills’ in place by the end of the year, which are plans to follow if the bank becomes distressed.
So, now that we’ve discovered that huge banks cause problems, instead of cutting them up and ensuring that no bank can ever become a systemic risk again, we are going to enshrine the concept in international law. We even have categories that show how important they are.
Does this mean that, whatever these banks get up to, they will be supported to the hilt to ensure that they continue ad infinitum?
This can only mean that big banks are here to stay with the blessing of the world’s politicians and that they are to become ever more central in the way the world’s economy is run.
And every time they make a mistake we will be paying the bill, again and again and again and again ………………..
Do we really need such huge banks? Why not just break them up? Where are we going with this?