When Europe’s leaders set out in June 2012 to break the “vicious circle” between banks and sovereigns, they left rules for treating government bonds untouched, an oversight that may subvert their drive to prevent a recurrence of the debt crisis.
Global regulators this week put JPMorgan Chase & Co. and HSBC Holdings Plc at the pinnacle of a list of 29 too-big-to-fail banks that face tougher capital rules than other lenders. The companies were also handed a map to plot their descent.
Global regulators are set to toughen capital requirements for banks’ holdings of the riskiest types of bundled debt, known as securitizations, while seeking to shield higher-quality paper from overly onerous rules.
Global banking regulators scaled back plans to boost capital requirements for lenders holding asset-backed bonds after banks warned that an initial blueprint was too harsh and would have curtailed lending.
Twenty percent of Europe’s biggest banks would have failed to meet global capital standards, known as Basel III, as of June 2011, the European Banking Authority said in an impact assessment of the planned rules.