Banks Face Pass-the-Parcel Debt Limit in Writedown Rule - Bloomberg

Banks Face Pass-the-Parcel Debt Limit in Writedown Rule - Bloomberg:



"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.



A global bank’s liabilities held by other lenders won’t fully count toward this target under the rules, according to the people, who requested anonymity because the talks are private. Banks must also have a loss-absorbing buffer equivalent to 6 percent of total assets, the people sai"



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