The world’s largest banks will have to hold 16 to 20 percent of their risk-weighted assets in equity and cancelable debt to shield taxpayers from big bills for bailing out failed banks during a crisis, The Wall Street Journal reported today. The plan, drawn up by the Basel-based Financial Stability Board, would force the biggest lenders to maintain a sizable capital cushion so that they could be wound down without causing global financial panic. Regulators see this rule as a way to put an end to the so-called “too-big-to-fail” problem — a crucial step in preventing bailouts for large lenders and shielding taxpayers from having to foot the bill for failing banks. The agreement is “a watershed in ending ‘too-big-to-fail’ for banks,” said Mark Carney, the governor of the Bank of England and chairman of the FSB. The FSB is a group of regulators that includes representatives from the world’s largest economies in Europe, Asia, and North and South America.
