Big Banks Forced to Raise $1.2 Trillion in New FSB Rules?

In an attempt to prevent a repeat of the 2008 financial crisis, the Financial Stability Board (“FSB”), a group of international regulators led by Bank of England's governor Mark Carney, issued a new set of rules for the banks considered “too big to fail” on Monday.

According to the new published rules, the world's 30 biggest lenders may be required to raise an additional $1.2 trillion by 2022 in debt or other securities that can be written off when winding down failing banks to avert another round of bailouts that were needed in the wake of the financial crisis.

The goal of the new standards, which arrive seven years after the 2008 financial crisis, is to ensure adequate maintenance of capital cushions by the world’s largest lenders, which can absorb losses in case the bank fails, thus avoiding the risk of a crisis and the subsequent contagion in the financial system.

The “too big to fail” banks on which these rules are expected to be applied include the global systemically important banks such as JPMorgan Chase & Co. JPM, The Goldman Sachs Group, Inc. GS, Bank of America Corp. BAC, Citigroup Inc. C, HSBC Holdings plc, Deutsche Bank AG and others.

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