Big Banks Need $1.2t Cushion
World Economy

Big Banks Need $1.2t Cushion

The world’s biggest banks must bolster their cash reserves by up to €1.1 trillion ($1.2 trillion) as protection against any future financial crises, an influential advisory body said.
The Financial Stability Board, which advises G-20 countries on banking reform, said banks considered “too big to fail” had still not done enough in the wake the 2008 financial crisis to ensure their own survival should disaster strike again, AFP reported.
To protect taxpayers from having to foot the bill of banking bailouts again, the biggest banks should raise between €457 billion and €1.1 trillion of additional cash, it said.
By 2019, the world’s 30 biggest banks, known as the Global Systemically Important Banks, need to establish a cash cushion allowing them to absorb losses equivalent to 16% of their assets, the FSB said.
This requirement would grow to 18% by 2022, according to the body’s final recommendations.
“The FSB has agreed a robust global standard so that G-SIBs can fail without placing the rest of the financial system or public funds at risk of loss,” FSB chairman Mark Carney, who is also Bank of England governor, said in a statement.
In a letter to G-20 governments, Carney added that no reform would ever offer “absolute” protection against shocks to the banking system but that the new measures would help ensure that in future the banks, and not taxpayers, would face the consequences of their actions.
The FSB was founded after the failure of the Lehman Brothers bank during the 2008 financial crisis to ensure that banks prepare better for times of crisis, saving governments from having to step in to avert financial sector meltdown.


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