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'too Big To Fail' Banks Need To Raise €460Bn In Capital

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http://www.telegraph.co.uk/finance/bank-of-england/11984600/Too-big-to-fail-banks-need-to-raise-460bn-in-capital.html

The biggest banks in the world need to raise almost half a billion euros to add to their capital buffers over the next seven years in the latest bid to end the ‘too big to fail’ problem whereby giant lenders are bailed out by governments if they collapse.

Officials at the Financial Stability Board, a group of international regulators led by the Bank of England’s governor Mark Carney, hope that this will mean banks are less likely to collapse in the way that Lehman Brothers did, sending shockwaves through the world economy.

When a bank struggles or does collapse, bank investors and creditors will pay up rather than the taxpayer, in a move which is designed to stop further bailouts such as those of Royal Bank of Scotland and Lloyds Banking Group.

"It is important to recognise that success in ending too big to fail may never be absolute because all financial institutions cannot be insulated fully from all external shocks," said Mr Carney.

..

The globally significant banks (GSIBs) – those which would seriously harm the wider economy if they fail – could have to boost their buffers of high-quality capital by as much as €1.1 trillion in the coming years.

However, most of that can be found by re-shuffling their existing buffers, leaving €457bn to be raised in the coming years.

..

A bigger challenge comes for banks in emerging markets. If their regulators abide by the new proposals those banks will have to raise as much as €415bn.

So what they are saying is the banking system needs to suck even more out of the system.

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However, most of that can be found by re-shuffling their existing buffers, leaving €457bn to be raised in the coming years.

So in other words, we're not really all that far away from being able to pull the plug and let gravity do its thing?

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No, that is not what they are saying. They are saying that they need to be better capitalised.

Yes, just as he said, the they have to suck more out of the system.when the middle man needs 1 trillion extra, that is 1 trillion less for the producer and consumer.

Stop apologising.

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Yes, just as he said, the they have to suck more out of the system.when the middle man needs 1 trillion extra, that is 1 trillion less for the producer and consumer.

Stop apologising.

+1 obviously has lots of savings to protect...

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Yes, just as he said, the they have to suck more out of the system.when the middle man needs 1 trillion extra, that is 1 trillion less for the producer and consumer.

Stop apologising.

So all that time when we criticised the banks for being highly leveraged and under-capitalised we were wrong?

If we can increase leverage limits, do away with pesky rules on capital and liquidity, then there would be more money all rooms for the producer and consumer. Yippee.

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The biggest banks in the world need to raise almost half a billion euros to add to their capital buffers over the next seven years..

Yet more thieving of other people's "high quality capital" by the banking spongers.

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"It is important to recognise that success in ending too big to fail may never be absolute because all financial institutions cannot be insulated fully from all external shocks," said Mr Carney.

Translation: come the next financial crisis central banks and governments will throw money at the banks again.

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Yet more thieving of other people's "high quality capital" by the banking spongers.

The last thing banks want to do is raise more capital. It is not in their interest. They want to hold less as this increases their return on capital, the key measure of profitability.

The owners of the banks are not forced to put more capital into the banks if they don't want to.

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No. It means that rather than posting artificially high profits for years and giving themselves inordinate sized bonuses, that society and shareholders would be better served if that money were put aside for the mistakes they have obviously made and really don't care about.

I would guess that the 'sucking out of the system' comments comes from the belief (probably correct from experience), that the hole will be filled by additional gouging wherever possible rather than reducing bonuses or risk taking.

God forbid the bankers get paid less or get smaller bonuses to fill the void!

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While its clear banking was unreasonably profitable 1980-2012, that isn't the case now - their return on equity is poor now compared to many other sectors.

Its right that it should stay that way - they've had their day in the sun and now they have to work for their profits like everyone else. If people want to invest in bank equity in return for poor dividends, high risk and unreasonable staff bonuses etc then let them.

The main thing is to not be cowed into reducing the regulatory requirements upon these firms.

As far as gouging goes, what sort of things are you referring to HAM - what is their gouging strategy going to be?

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