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FSB to publish revised list of too-big-to-fail banks

Karel Lannoo

The Financial Stability Board plans to publish a revised list next month of too-big-to-fail financial institutions whose failure could cause economic instability.

The board compiled a list last year of 29 banks deemed systemically important and to be subject to higher capital requirements as part of an effort to reduce risk in the global banking system. Firms on the list include BNP Paribas SA, Citigroup Inc., HSBC Holdings PLC, JPMorgan Chase & Co. and RBS, all of which would have faced the highest capital surcharges – 2.5 percent of risk-weighted assets, Businessweek reports.

Karel Lannoo, the CEO of the Centre for European Policy Studies in Brussels, said that Dexia SA, a Franco-Belgian lender being liquidated after losing access to unsecured funding, is likely to be removed from the FSB’s list.

Mark Carney, the chairman of the FSB and governor of the Bank of Canada, said that banks have progressed in increasing capital levels, which are indicative of their ability to weather tumultuous economic conditions.

The new list will be based on data from the end 2011 and will be updated on an annual basis, according to Businessweek.

The FSB, which concluded a meeting in Tokyo last week, said that financial authorities are dedicated to preventing a repeat of the recent Libor scandal and boosting the “intensity and effectiveness” of oversight of systemically important financial firms.

The board endorsed rules for nationally systemic banks that allow local regulators to set capital surcharges. The rules were published by the Basel Committee on Banking Supervision last week, Businessweek reports.

Additionally, the FSB expressed concern regarding “conflicts, inconsistencies and gaps” in the rules that various countries have established to regulate the over-the-counter derivatives industry.

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