Global Regulators Name Systemic Firms, But Leave Details Up in the Air

By Donna Borak

International regulators ended months of speculation on Friday by publicly naming the 29 financial firms deemed systemically important, which now face a capital surcharge. But the Financial Stability Board also left out some key details, including the exact size of the surcharge, which will vary across institutions. Instead, regulators said they would postpone that decision until next November, a potential negative for firms that were looking for clarity on exactly how much capital they will have to hold. Regulators have previously said that firms would have to hold between 1% to 2.5% in extra capital depending on a bank’s size, riskiness and interconnectedness. And while regulators said the surcharge would not be fully phased in until November 2016, analysts said firms would likely have to hold the additional capital much sooner due to market expectations. “As is always the case with these requirements, named banks are under an immediate gun to raise it in the market,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics. “That’s the real issue. They can say that they are phasing it in from a regulatory point of view, but investors look now because capital later is a cost to investors later. The market impact is always immediate.”