November 01, 2012

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.

The four global banks will be required to hold an extra 2.5 percent of common equity as a percentage of risk-weighted assets on top of a 7 percent minimum being phased in from January, according to the Financial Stability Board, a regulatory task force for the group of 20 top economies.

The additional cushion aims to make sure large banks cannot threaten the financial system in future crises and require government bailouts.

The FSB will update its requirements twice more over the next two years before they start going into effect in 2016.

Large banks are building capital to meet the new requirements known as "Basel III." For banks, holding more capital - in other words, funding themselves with more equity - makes it harder to wring profit from their balance sheets. But higher capital levels also give banks a bigger cushion to absorb losses, making it harder for them to go broke in bad times.

Barclays Plc and BNP Paribas were assigned the next highest buffer of 2 percent, according to the FSB. Eight banks including Bank of America Corp and Goldman Sachs Group Inc fell in the next highest bucket of 1.5 percent.

The remaining 14 banks will be required to hold 1 percent of extra capital. No bank was in the 3.5 percent range, which is considered a stick to stop banks from growing any bigger. See Factbox

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