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Global Bank Watchdog Turns Eye to Big National Banks

Global banking regulators have mapped out how they will tighten up supervision of big domestic banks from 2016 in a bid to avoid calling on taxpayers if they fail.

Global banking regulators have mapped out how they will tighten up supervision of big domestic banks from 2016 in a bid to avoid calling on taxpayers if they fail.

The Basel Committee on Banking Supervision has already set out how the world's top 29 banks such as Deutsche Bank , Goldman Sachs and HSBC must hold extra capital from 2016.

On Friday, the committee set out how the next tier down of lenders, the so-called domestic systemically important banks or D-SIBs, will be treated.

This second batch of banks has presented a challenge as some are owned by some of the top 29 global banks - or G-SIBS - which will already have to hold extra capital.

Regulators say this has raised the issue of where the extra capital for D-SIBs would sit - at the parent or locally?

In its consultation document, the committee said home supervisors of the top 29 global banks should make sure they are adequately capitalized to cover requirements of all local regulators where the bank has operations.

"Home authorities should impose the higher of either the D-SIB or G-SIB (loss-absorbing) requirements in the case where the banking group has been identified as a D-SIB in the home jurisdiction as well as a G-SIB," the committee said.

National regulators will have discretion to decide what form extra supervision should take, the committee said.

This discretionary approach contrasts with the globally set fixed rules for extra capital buffers the top banks must comply with.

The committee also said it had "no intention" to change the rules that allow local regulators to impose additional loss absorbency requirements on the local subsidiaries of globally important banks within their jurisdiction.

This will give flexibility to countries like Britain, Spain, Sweden and Switzerland which are forcing their banks to hold far more capital than the globally agreed minimums.

The committee's principles require supervisors of a bank to cooperate with each other when calculating extra capital requirements to ensure consistency and avoid "double counting."

All banks across the world must have core capital buffers of at least 7 percent of risk weighted assets under a global accord known as Basel III which is being phased in from January.

Capital requirements for the top banks and next tier down would be on top of that 7 percent minimum.

The Basel Committee said Friday's paper is out for consultation and requested banks to comment by Aug. 1.

(Reporting by Jonathan Gould and Huw Jones; Editing by Mark Potter)

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