LONDON, Nov. 11 (UPI) -- The Financial Security Board (FSB) has announced new rules that would require "too big to to fail" banks to hold more money against losses.
The new rules are intended to prevent taxpayers from footing the bill for the bailout for the big banks -- an occurrence that Mark Carney, FSB chairman and governor of the Bank of England, called "totally unfair" during the 2008-09 financial collapse.
"The banks and their shareholders and their creditors got the benefit when things went well," he told the BBC. "But when they went wrong, the British public and subsequent generations picked up the bill -- and that's going to end."
Carney said the new rules would leave the creditors and big institutions who hold debt with the banks with the bailout bill if fortunes turn south.
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The new regulations would require the 30 biggest banks in the world to bolster their "loss-absorbing capacity" by issuing equity or long-term debt worth 16-20 percent of their risk-weighted assets.
This could result in European banks issuing more than €27 billion ($33.6 billion) in loss-absorbing capital. U.S. banks would have to produce even more as the Federal Reserve intends to require at least half of the loss-absorbing capacity in a more conservative version of the plan.
This one-size-fits-all plan is being labeled as disproportionate by Wells Fargo, which considers its more traditional banking operation less risky than its fellow financial institutions.
"We don't have any differences with their goals," said Paul Ackerman, Wells Fargo's treasurer. "We're disappointed that it's not risk-sensitive enough. It disproportionately impacts us."
Banks headquartered in emerging markets, including three in China, will not be immediately required to meet the standards. Banks that will fall under the new regulations will be able to submit their views on the new rules until Feb. 2, 2015.
