Global banking regulators will not agree on a list of "too-big-to-fail" banks until after next month's G20 summit, the head of the Basel Committee on Banking Supervision said today.
"We will discuss the methodology more in detail in our November-December meeting (of the committee)," Nout Wellink told reporters in Seoul.
The Basel Committee has drawn up tough new rules on banks' capital, known as Basel III, which are expected to be endorsed by leaders of the world's 20 biggest economies (G20) at a summit in Seoul next month.
Mr Wellink said the committee would then agree on additional measures to make very big banks less risky by boosting the loss-absorbing capacity of these institutions by March 2011 before setting out "concrete" measures in the middle of next year.
Those measures are expected to include forcing large banks to hold additional capital, along with a role for bail-in-debt and contingent capital - bonds which convert to equity at an agreed point when a bank gets into trouble.
"These measures will be part of the whole package that feeds into the Financial Stability Board," said Wellink, who is also a member of the European Central Bank's Governing Council.
He added that the banks on the list would be ones judged to be "global systemically important financial institutions" - whose reach goes far beyond their national regulator's borders.
However, it remains unclear whether the list will actually be published with some governments understood to be concerned that just the names of the affected institutions would add to the problem of moral hazard.
The Financial Stability Board (FSB) has been tasked by G20 with finding a solution to the moral hazard problem caused by big globally interconnected banks. It is expected to present a broad list of recommendations at the Nov. 11-12 summit but no specific rules.
Recommendations are expected on how to deal with the failure of a large bank; improving cross-border supervision; and boosting the overall infrastructure of the financial system; as well as raising banks' loss-absorbing capacity.
It is expected that once the measures are eventually agreed on, national regulators would then be subject to a "peer-review" process to ensure the designated systemically important banks on their turf were subject to stringent requirements drawn from the FSB list of recommendations.
Reuters