Banks Face Pass-the-Parcel Debt Limit in Writedown Rule
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The world’s largest banks face curbs on how much they can rely on selling debt to each other to meet a planned international standard on their ability to absorb losses in a crisis.
The Financial Stability Board reached a provisional deal last week on the plan for so-called total loss-absorbing capacity in a bid to take taxpayers off the hook when banks fail. The plan requires banks to have capital and other loss-absorbing securities, such as subordinated debt, equivalent to 16 percent to 20 percent of their risk-weighted assets by 2019, said three people familiar with the matter.