G20 finalising flexible ‘ bail in’ bond deal for big banks

London, Sept 5: The world's biggest banks may be able to count surplus capital towards new buffers of special bonds being imposed by regulators, sources said. To secure a deal, the regulators have agreed to a more flexible approach to cater for differences in banking models across the world, both sources said.

The proposed new rule for the world's biggest banks is part of a wider plan for making banks safer after governments had to shore up lenders during the 2007-09 financial crisis. The new buffers, known as "gone concern loss absorption capacity" or GLAC, are being drafted by the Financial Stability Board (FSB), the regulatory task force of the Group of 20 economies, and at meetings this week there was progress on agreeing core elements for the G20 summit in November to endorse said the sources.

Regulators have now agreed in principle that capi- tal banks hold above minimum global requirements could be counted towards the GLAC figure, the sources said on Thursday.

"The aim is to think of it as one stack rather than separate capital and GLAC," one source said.

This will be seen as a rebuff to US supervisors who wanted the GLAC requirement to be made up of a standalone buffer of only subordinated debt which could not be mixed up with other bank safety cushions.

Eating into the stack would then trigger intervention by regulators to force the lender to bring it back up. The measure will apply to 29 big banks the FSB has identified and who already have to hold more capital than their smaller peers by 2019. Reuters

A file picture of Bank of England governor Mark Carney (centre) with Jeremy Harrison (left) and Svein Andresen at a Financial Stability Board media briefing in London on March 31, 2014