New rules on ‘too-big-to-fail’ banks proposed

Global regulators have proposed new rules to ensure that bank creditors rather than taxpayers pick up the bill when a big lender collapses.

After the financial crisis in 2007 to 2009, governments had to spend billions of dollars of state money to rescue banks that ran into trouble and could have threatened the global financial system if allowed to go under. Since then, regulators from the Group of 20 economies have been trying to find ways to prevent this happening again.

The plans envisage that global banks like Goldman Sachs and HSBC should have a buffer of bonds or equity equivalent to at least 16% to 20%of their risk-weighted assets, like loans, from January 2019. These bonds would be converted to equity to help shore up a stricken bank.