G20: Citi, JPMorgan May Face Highest Basel Surcharges
Reported for Bloomberg by Jim Brunsden and Rebecca Christie
Citigroup Inc. (C), JPMorgan Chase & Co., BNP Paribas SA, Royal Bank of Scotland Group Plc, and HSBC Holdings Plc (HSBA) may face top capital surcharges of 2.5 percentage points, according to a provisional list prepared by global regulators and obtained by Bloomberg News.
The list was drawn up as part of plans by the Group of 20 nations to force banks whose failure could damage the global economy to boost their reserves by 1 to 2.5 percentage points above minimum levels agreed by international regulators. Bank of America Corp. (BAC), Barclays Plc (BARC) and Germany’s biggest bank Deutsche Bank AG (DBK) may face surcharges of 2 percentage points, according to the list.
The extra requirements are calculated against banks’ interconnectedness, size, complexity, global reach, and the ability of other firms to take over their functions if they fail. Banks’ positioning on the list may also be altered through ‘supervisory judgment,’ the Basel committee has said.
‘While banks technically won’t need to be fully compliant’ with the rules until 2019, their ‘ability to deploy capital in the near term will likely remain somewhat of a question mark until local regulators provide clarity on expectations,’ analysts from Goldman Sachs said in a note published Nov. 4.
The surcharges will be applied on top of an overhaul of bank-capital requirements that international regulators agreed on last year. Those changes, known as Basel III, will more than triple the core reserves that lenders must hold.