Bonds buffer will protect biggest banks from bankruptcy

Noam Stiekema

The largest banks in the world should have a bonds buffer in the event of failure so to be avoided bailouts by governments offer international regulatory authority. The idea is the last major part of the banking reform proposed by world leaders after the financial crisis in the period 2007-2009, during which millions of taxpayers […]

Bonds

BondsThe largest banks in the world should have a bonds buffer in the event of failure so to be avoided bailouts by governments offer international regulatory authority. The idea is the last major part of the banking reform proposed by world leaders after the financial crisis in the period 2007-2009, during which millions of taxpayers have to support under-capitalized lenders. The Financial Stability Board (FSB), comprised of regulators from the Group of 20 top economies in the world (G20), said that international banks such as Goldman Sachs and HSBC should have to January 2019 with buffer bonds or equity, equivalent to 16-20% of the weighted relative risk assets.

The bonds buffer will be converted into capital, to ensure the stability of the problem bank. The total buffer will include minimum core capital requirements that banks must meet. The proposal is expected to be endorsed by the G20 leaders later this week in Australia. The issue will be open for public consultation until 2nd February 2015. The president of the Financial Stability Board and governor of the Bank of England Mark Carney said that the idea of the buffer will be made complete in the next year. This will be marked a turning point for the termination of the practice in some parts of the world banks that are too big to be left to fail. The new rule will apply to 30 banks Financial Stability Board identified as important to the global financial system.

“Once implemented, these agreements will play an important role in the world and will allow banks systemically important to be bailed out without resorting to a government subsidy and without problems to the wider financial system”, Carney said in a statement.

Most of the banks will have to expand its debts in order to comply with the requirements, said FSB. Some current liabilities you may need restructuring. According to plans, parts of the bonds buffer will be owned by foreign subsidiaries, which will serve as a stand for regulators outside the home country of the parent bank.

Read this next

Executive Moves

Finalto recruits Antony Parsons as head of liquidity

Finalto, the financial trading division of Gopher Investments, is making a broader push into the liquidity provision space, culminating in a new appointment focused on expanding the business into new markets.

Digital Assets

Huobi introduces Tether’s stablecoins pegged to euro, gold

Huobi, the world’s sixth-largest crypto exchange by trading volume, is set to introduce for its clients two stablecoins representing ownership of physical gold and Euro-pegged tokens.

Retail FX

Saxo Bank reports lackluster volumes for November; FX up 40% YoY

FX trading volumes through Saxo Bank’s platforms improved slightly in November, extending its volatile curve as investors continued to weigh central banks’ policy against concerns over a global economic slowdown.

Executive Moves

CMC Markets taps Finalto’s Julia Free to head UK compliance

CMC Markets PLC (LSE:CMCX) has onboarded Julia Free as its newest head of UK compliance as part of a broader organizational reshuffling at the UK’s biggest spread better.

Digital Assets

Ankr successfully patches hack, will reimburse victims and take actions to prevent further attacks

DeFi protocol Ankr plans to reimburse its affected users after a hacker managed to exploit a bug in its code that allowed for unlimited minting of its liquid staking token.

Industry News

ASIC cancels/suspends AFS license of AFSL Group and Quantum Funds Management

ASIC canceled the AFS license of AFSL Group because it failed to lodge statements and audit reports and it did not maintain AFCA membership. The Australian regulator suspended Quantum because it does not have the required professional indemnity insurance coverage.

Executive Moves

BidX Markets hires Shaun French as Research Analyst – Multi Asset

“We believe with his background in the Financial Markets and being based in Dubai, he will be able to provide our clients with access to outstanding research, while also being in a great location to help support our international clients base which is growing at a rapid pace’’.

Institutional FX

Nasdaq migrates US options exchange to AWS with +10% performance in round-trip latency

Nasdaq has announced the successful migration of the core trading system of Nasdaq MRX – one of its six U.S. options exchanges – to Amazon Web Services (AWS).

Institutional FX

TraditionData launches oil swaps pricing data at a critical time in OTC oil traded markets

TraditionDATA has announced the release of a new proprietary Oil Swap Model (OSM) which brings further visibility into illiquid and opaque oil markets.

<