By Huw Jones
LONDON, April 6 (Reuters) - Global regulators have opted for a flexible way to measure risks posed by the world's biggest banks, rather than drawing up a fixed list of systemically critical institutions for extra attention.
Under proposals still being debated by regulators, banks identified as globally systemically important would face a tougher regime such as higher capital requirements, a strong recovery and resolution mechanism and enhanced supervision.
The Basel Committee is working on the package with the Financial Stability Board for leaders of the world's top 20 economies (G20) to endorse in November.
"The (flexible) methodology can serve as a basis for the differentiated treatment of systemic institutions without needing to specify a fixed list of such institutions," Stefan Walter, secretary general of the Basel Committee, said in a speech in Switzerland made available to the press.
The package would initially be rolled out for the very
biggest banks such as Goldman Sachs
The plan has sparked fierce debate among some G20 countries
and banks over which lenders will come under the net, with HSBC
wanting a long list to avoid unfair competition, while Deutsche
Bank
Walter said risk would be measured according to the size of a bank, its links to the financial system, global activity, complexity and how difficult it would be to replace the services it offers.
The aim is to avoid haggling over a fixed list and have instead a more fluid approach, with banks moving up and down the risk scale and dropping in or out of the package's requirements.
It could also make it possible to tailor the toughness of the extra safeguards on a sliding scale.
FSB Chairman Mario Draghi said on Tuesday there was no final deal yet on the package or whether it would be obligatory or discretionary for banks affected to hold extra capital in some form. [ID:nLDE7341TU]
Neither has any decision been taken on how many banks would be included in the initial roll-out, Draghi said.
The Basel Committee is working on strong resolution and recovery frameworks for banks to reduce the impact of failure on the financial system and markets.
Some policymakers argue this could avert the need for big banks to hold extra capital, but others say this cannot be the case as big banks operate across borders and there is no global resolution framework in place yet.
The package will be published for consultation in the summer ahead of endorsement by the G20 in November. (Reporting by Huw Jones; Editing by Will Waterman)