LONDON Oct 10 The benefits for taxpayers of a
safer financial system will far outweigh the temporary hit to
economic growth of imposing an extra capital buffer on top
banks, global regulators said on Monday.
The Basel Committee on Banking Supervision and the Financial
Stability Board said their joint study group estimates that a
one percentage point buffer on the top 30 banks over eight years
would cut economic growth by less than 0.01 percent a year
during the phase-in period.
"The Macroeconomic Assessment Group concludes that the
transition to stronger capital standards on global systemically
important banks is likely to have at most a modest impact on
aggregate output, while the benefits from reducing the risk of
damaging financial crises will be substantial," the two bodies
said in a statement.
Both have approved the bank capital surcharge plan that
leaders of the world's top 20 economies (G20) are set to endorse
A surcharge of 1-2.5 percent -- the amount depending on five
factors like complexity and international reach -- will be
introduced from 2016 over three years with banks such as
JPMorgan Chase , HSBC , Barclays and
Deutsche Bank almost certainly included.
The surcharge comes on top of a minimum of 7 percent capital
buffers all banks must hold under the global Basel III accord
being phased in from 2013.
The aim is to avoid taxpayers having to bail out banks again
in the next crisis. It is part of a wider effort to tackle
so-called "too big to fail" lenders by ending market and
investor assumptions that governments would not allow them to
JPMorgan Chase Chief Executive Jamie Dimon has described the
surcharge as anti-American and has clashed with Bank of Canada
Governor Mark Carney, tipped to head the FSB from November.
Banking industry bodies warn that piling capital
requirements on lenders will crimp their ability to aid economic
growth, but regulators say banks fail to include the benefits of
tougher standards in their calculations.
The Basel Committee and FSB -- which has been tasked by the
G20 to coordinate the world's core regulatory responses to the
financial crisis -- said the permanent benefits of the surcharge
arise from the reduced likelihood of systemic crises that can
have long-lasting effects on the economy.
The two bodies estimated that the Basel III proposal
combined with the capital surcharge "contribute a permanent
annual benefit of up to 2.5 percent of GDP -- many times the
costs of the reforms in terms of temporarily slower annual
The Basel III rules and surcharge combined will lower
economic growth by an estimated 0.34 percent at the point of
peak impact, the regulators said.