US Disputes Talk of Higher Capital for Big Banks

Finance ministers and central bankers from the Group of 20 nations may consider raising capital levels for the world's biggest banks by two to three percentage points above what was agreed to recently under the Basel III accord, a senior official told CNBC.

Should this proposal be adopted, it could affect between 20 and 25 banks around the world, the offiial said.

US officials, however, are disputing the idea that any further increase in capital requirements will be considered for big banks. Instead, they said, they plan to discuss a broader goal of "greater loss absorption by systemically important banks."

The US officials said they support the idea of increased capital requirements but don't believe they could get all G20 nations to impose those charges. For instance, Germany, France and Japan are said to oppose such a measure. The US officials are concerned that if other countries don't go along with the proposal, it would put US banks at a competitive disadvantage.

Under Basel III, agreed to earlier this month, banks would be required to hold top-quality capital totalling 7 percent of their risk-bearing assets. This is a substantial increase from the current requirement of 2 percent, but is significantly lower than what banks had feared earlier this year and comes with a phase-in period extending in some cases to January 2019 or later. 

The senior official told CNBC that the proposal would call for big banks to increase their capital above the Basel-mandated level of 7 percent to somewhere between 9 and 10 percent. The discussions would take place at the Oct. 19 meeting of finance ministers and central bankers in Seoul, South Korea.

Leaders of the Group of 20 rich countries and big emerging economies are scheduled to meet in November, also in Seoul, to give final approval to the new capital rules.

The G20, blaming the global credit crisis partly on risky trading by banks, called on regulators in 2009 to work on tougher bank capital rules.

On Tuesday, UK Financial Services Authority Chairman Adair Turner told the annual Eurofi conference on EU financial regulation that the extra capital requirements being discussed for large banks was not expected to be mandatory in all countries.

"Details should involve appropriate tailoring for national circumstances. It may involve a different balance in different countries,'' he said.

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—Reuters contributed some of the background to this report.