Global regulators have proposed a two-stage deal for banks to issue debt to raise cash in a crisis without having to call on taxpayers for help, a G20 source said on Friday. The regulatory task force of the Group of 20 leading economies -- The Financial Stability Board (FSB) -- is seeking to straddle a transatlantic divide that has so far prevented agreement on a fixed figure for a debt issue that can be written down by a failing bank to replenish core capital buffers. This Total Loss Absorption Capacity (TLAC) will be required of the world's top 30 banks, including the likes of Goldman Sachs and Deutsche Bank, and is part of efforts to ensure that no bank is too big to fail. FSB Chairman Mark Carney has said that the buffer plan is the last major piece of new regulation to make banks safer after governments had to bail out several lenders during the 2007/09 financial crisis. The FSB's proposal would see the two-stage introduction of a buffer of debt from 2019 that can be "bailed in" to raise equity equivalent to 16 percent of a bank's risk-weighted assets, the source said, rising to 20 percent from 2022. The United States had pushed for a straight 20 percent, while some in Europe had argued for 16 percent because their banks were still rebuidling capital after the financial crisis. Another G20 source said the option of a single TLAC figure in force from 2019 was still on the table. TLAC, which includes the mandatory minimum core capital banks must hold, will apply to banks that the FSB has identied as being crucial to the global banking system. The FSB met on Monday to iron out remaining issues, though G20 sources say that it remains unclear whether finance ministers will give their backing to the proposal. A final decision will be taken by G20 leaders at their November summit.
