The shortfall facing lenders from JPMorgan Chase & Co. to HSBC Holdings Plc could be as much as $870 billion, according to estimates from AllianceBernstein Ltd., or as little as $237 billion forecast by Barclays Plc, Bloomberg News reported yesterday. The range is so wide because proposals from the Basel-based Financial Stability Board (FSB) outline various possibilities for the amount lenders need to have available as a portion of risk-weighted assets. With those holdings in excess of $21 trillion at the lenders most directly affected, small changes to assumptions translate into big numbers. The FSB wants to limit the damage the collapse of a major bank would inflict on the world economy by forcing them to hold debt that can be written down to help recapitalize an insolvent lender. For senior bonds to suffer losses under present rules the institution has to enter bankruptcy, a move that would inflict huge damage on the financial system worldwide if it happened to a global bank.
