BERLIN: Global financial regulators published new rules that aim to stop banks from becoming “too big to fail,” to prevent a repeat of the 2008 financial crisis, when taxpayers had to bail out banks whose collapse would have threatened large-scale financial panic.
The plan, drawn up by the Financial Stability Board in Basel, Switzerland, aims to ensure that the world’s biggest lenders maintain sizable financial cushions that can absorb losses as a bank is failing, without threatening a crisis in the broader banking system. It sees the cost of a giant bank’s failure being borne by its investors, not taxpayers.
The new standards aim to make banks change the way they fund themselves to better weather a crisis, a requirement that could force some firms to issue billions in new securities and debt and possibly dent profits.
The rules will apply to the world’s top 30 banks, such as HSBC Holdings PLC, J.P. Morgan Chase & Co. and Deutsche Bank AG, which the FSB classifies as “systemically important.” Banks are considered to be systemically important if their failure would pose a broad threat to the economy.
