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Basel Committee Tacks on Liquidity Surcharge Plan for World’s Largest Banks

  • By Andrew Deichler
  • Published: 6/27/2011

Banks would be required to hold an extra 1 percent to 2.5 percent of capital, based on their systemic importance, under a new proposal from the Basel Committee.

The Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision (BCBS), agreed on a proposal for a capital surcharge on the world’s largest banks over the weekend. The surcharge, which would take effect between 2016 and 2018, is intended to decrease the possibility of government bailouts for global systemically important banks in the wake of the 2008-09 financial crisis.

If a bank grows even larger, an additional 1 percent surcharge would be assessed. These surcharges are in addition to new Basel III rules, set to begin in 2013, that force all banks to hold an extra 7 percent of capital in reserve.

“These measures will strengthen the resilience of G-SIBs and create strong incentives for them to reduce their systemic importance over time,” said the GHOS, in a statement.

The proposal is being submitted to the Financial Stability Board and will be issued for consultation at the end of next month. It would require approval from the G20, which next meets in November.
 

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