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Too-Big-To-Fail Banks Face Up To $870 Billion Capital Gap

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http://www.bloomberg.com/news/2014-10-13/too-big-fail-banks-seen-facing-capital-gap-of-up-to-870-billion.html

Too big to fail is likely to prove a costly epithet for the world’s biggest banks as regulators demand they increase holdings of debt securities to cover losses should they collapse.

The shortfall facing lenders from JPMorgan Chase & Co. (JPM) to HSBC Holdings Plc could be as much as $870 billion, according to estimates from AllianceBernstein Ltd., or as little as $237 billion forecast by Barclays Plc.

The range is so wide because proposals from the Basel-based Financial Stability Board outline various possibilities for the amount lenders need to have available as a portion of risk-weighted assets. With those holdings in excess of $21 trillion at the lenders most directly affected, small changes to assumptions translate into big numbers.

“The direction is clear and it is clear that we are talking about huge amounts,” said Emil Petrov, who heads the capital solutions group at Nomura International Plc in London. “What is less clear is how we get there. Regulatory timelines will stretch far into the future but how quickly will the market demand full compliance?”

The FSB wants to limit the damage the collapse of a major bank would inflict on the world economy by forcing them to hold debt that can be written down to help recapitalize an insolvent lender. For senior bonds to suffer losses under present rules the institution has to enter bankruptcy, a move that would inflict huge damage on the financial system worldwide if it happened to a global bank.

Changing the rules of the game, bond holders to lose even if the bank doesn't enter bankruptcy. Surely if it's insolvent it's bankrupt?

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http://www.bloomberg.com/news/2014-10-13/too-big-fail-banks-seen-facing-capital-gap-of-up-to-870-billion.html

Changing the rules of the game, bond holders to lose even if the bank doesn't enter bankruptcy. Surely if it's insolvent it's bankrupt?

arbeit macht frei.

send them all to debtors prison to work it off properly.

tach them a bit of responsibility to stop sponging off everyone else, because everyone else is getting a bit irritated.

Edited by oracle

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The only way is HPC.

There is a £1 Trillion+ in profit to immediately book in UK alone, with a low-mid-prime HPC, followed by volume mortage lending, on high numbers of transactions, to well positioned buyers.

That can add to the reserves the banks have built up, perhaps now enought to act as buffer through HPC, but which need to be improved upon.

UK homeowners alone are sitting on too many £Trillions in dead money equity on overvalued houses. Fewer 2 in 5 with a mortgage/property-debt according to one report. The banks need to go for that.

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