Banks face new set of capital rules

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Banks face being hit with a new set of international capital rules aimed at forcing bondholders rather than taxpayers to bail out failing institutions.

Global regulators are seeking support from world leaders to draw up proposals to force banks to hold a minimum amount of debt that can be "bailed in" if a bank collapses.

Mark Carney, the Bank of England governor who is heading global efforts to prevent a repeat of the 2008 financial crisis, said the move was a necessary component in the "ambitious" desire of the Group of 20 nations to stop the most important banks from being "too big to fail".

(Read more: G-20 focuses on policy clarity, wary of new market turmoil)

As chairman of the Financial Stability Board, Mr Carney was seeking to win political backing for regulators to draw up more concrete plans at this week's G20 summit in Russia.

But even with agreement, he said that the process of protecting countries from "too big to fail" banks would still take a long time and could not be completed until 2015 at the earliest.

"We now have to move from powers to practical . . . We have made a promising start but we have to translate it into actual resolution plans [for individual global banks]", he said.

(Read more: Shadow banks must comply with first global rules by 2015)

To ensure failed banks did not need to be bailed out by taxpayers, those which are deemed to be globally important banks are likely to be asked to ensure their capital structures offer taxpayers sufficient protection with high levels of potential loss absorption.

Bob Penn, a partner at Allen & Overy, said: "Banks will welcome a global standard for loss-absorbing capacity, as it will promote a level playing field."

Individual banks may also be forced to make substantial organisational changes, while regulators will probably have to sign unprecedented co-operation agreements in which they promise to respect each other's decisions about inflicting losses on shareholders and creditors.

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Both the US and EU have made progress towards a legal framework that would make it possible to shut down or break up a failing cross-border bank, Mr Carney said. But he added that they were a long way from being ready to deal with an actual problem.

He also warned individual countries not to become so attached to their own local solutions. "We need to guard against division, national structures that could impede the integration of international markets," he said.

The EU, the UK and the US are all working on different schemes to protect their local economies from failing global banks, including the ringfencing of retail banking in the UK and local capital requirements for branches of overseas banks in the US.

(Read more: US near deal with some Swiss banks in offshore tax probe)

The "bail-in-able" debt requirement would come on top of the core tier one capital that banks already have to hold as part of Basel III global reforms. Switzerland already requires something similar but a global rule would be new for most global banks.

"The question is whether you need a substantially consistent global minimum," said Mr Carney, who heads the global regulatory body, the Financial Stability Board. "After absorbing [a bank's losses], is there sufficient bail-in-able debt to relaunch?"