HSBC and Barclays, two banks who were partially responsible for the massive mis-selling of payment protection insurance to people in the UK have been told by the G20’s Financial Stability Board that they need to hold smaller capital buffers.
The buffers were put in place following the 2008 global financial crash and force banks hold more of their capital savings in the form of bonds, so that if a re-occurrence of the 2008 crash occurs again and a bank is forced to go into liquidation – this event would not affect other banks around the world, like what happened in 2008.
From the Telegraph:
The size of the capital buffer banks on the FSB’s list must hold depends on which of the five categories, or “buckets”, the regulator puts them in. There are currently no banks in the top bucket, which would force lenders to have a 3.5pc capital surcharge on top of global minimum standards.
However, Citigroup has replaced HSBC in the next highest “bucket” of globally systemically important banks, meaning the US lender has a 2.5pc surcharge. HSBC now faces a 2pc add-on and Barclays has been moved down a category and has 1.5pc surcharge.
While the FSB, which is chaired by Bank of England Governor Mark Carney, moved banks between different buckets, no new lenders joined or were removed from the 30-strong list.