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PricewaterhouseCoopers AG in Zurich, said in a telephone interview. Not necessarily for how much extra
capital systemically important financial firms, or SIFIs, must hold, she said, but at least with the
structure of how the SIFI surcharge is going to work.
Tougher Rules
The Group of 20 nations agreed in November that lenders whose collapse would threaten the wider
financial system should face tougher capital rules than other banks, increasing their ability to take losses
without failing. The Basel committee has been tasked by the Financial Stability Board with drafting the
requirements.
Regulators are examining possible concrete minimum criteria that CoCos would have to fulfill, to
form part of the reserves, Walter said. We re already reviewing some preliminary proposals next
week, he said. Much more concrete proposals will then follow in June.
Lloyds Banking Group Plc, which was bailed out by the U.K. taxpayer, swapped existing notes for CoCos
in November 2009, Bloomberg data show.
The possible use of CoCos only concerns additional rules for systemically important banks that go beyond
capital and liquidity standards agreed on by the Basel group last year, Walter said.
Transparency Standards
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The use of CoCos is not being considered for the minimum requirement, Walter said. It s really for the
additional loss absorbency of SIFIs.
Separately, the Basel committee will draw up standards requiring banks to disclose what instruments are
included in their capital reserves, Walter said.
All components of the capital base have to be fully transparent, Walter said. Investors should be able to
look at different banks capital composition and compare them in terms of their capital structure,
something that today is not possible.
The Basel committee is also examining how to ensure that so-called shadow banks face similar rules to
traditional lenders when they carry out the same kinds of activities, Walter said.
What you don t want is something which is bank-like and therefore could be susceptible to liquidity runs,
deleveraging and contraction of credit, not being subject to any regulation, that I think is the biggest
problem, he said.
Examples of shadow banks include structured investment vehicles, credit hedge funds and money market
mutual funds, the Federal Reserve Bank of New York said in a report last year.
bosmeld 01-03-2011 10:44
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