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Citi, Chase Among Banks That Must Hold Most Extra Capital, Regulators Say

Citigroup Inc, Deutsche Bank , HSBC and JPMorgan Chase & Co will need to hold the most extra capital of 28 banks considered so large and complex they need an extra buffer to absorb potential losses, global regulators said on Thursday.

Thursday's statement was timed for a meeting of G20 finance ministers in Mexico this weekend when governments will review progress in implementing a welter of pledges to reform finance after the 2007-2009 financial crisis.

"It's a significant cost to all of the institutions, especially those at the higher end," said Karen Petrou, managing partner of Federal Financial Analytics, a Washington-based financial services consulting company.

Petrou noted it was up to national regulators to act on the rules for the buffers to have any teeth.

Citigroup spokeswoman Shannon Bell said the bank's estimated Tier 1 common capital ratio of 8.6 percent under Basel III at the end of the third quarter was among the highest in the industry. The bank expects to continue to generate capital through earnings and the divestiture of non-core assets, she said.

JPMorgan declined to comment. Deutsche Bank and HSBC could not be immediately reached.

The Financial Stability Board published an initial list of 29 so-called systemically important banks in November 2011, but Thursday's statement was the first time that it assigned specific capital buffers to each bank.

The FSB on Thursday reduced the list to 28 as it removed three institutions - Dexia , Commerzbank and Lloyds Banking Group - and added BBVA and Standard Chartered.

The capital requirements likely held some surprises for banks and their investors. For example, an industry source had told Reuters last year that a preliminary assessment showed Bank of America and Deutsche Bank would likely be in the 2 percent category. Bank of America ended up being lower and Deutsche Bank higher.

The additional requirements will begin to be applied in January 2016 and will be phased in by January 2019. The FSB's list will be updated in November 2013 and 2014.

Copyright 2012 by Reuters. All rights reserved.

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