HSBC, Barclays required to hold smaller capital buffers

British banks HSBC and Barclays will now be required to hold smaller capital buffers than before after they were deemed by the global financial regulator to be less of a risk to the international banking system, according to a report released on Monday.

The Financial Stability Board (FSB), in consultation with Basel Committee on Banking Supervision (BCBS) and national authorities, revealed the 2016 list of global systemically important banks (G-SIBs) on Monday.

There are no additions or exclusions from the 30-strong list published annually, but HSBC is now required to hold a 2 percent additional capital buffer on top of the requirements of the British authorities, down from a previous 2.5 percent.

Barclays also saw its additional capital buffer requirements reduced from 2 percent to 1.5 percent.

The list of GSIBs was drawn up after G20 leaders in 2011 ordered a framework to identify Globally Systemically Important Institutions (G-SIIs), defined as those that might have the greatest impact on the global financial system and the global economy, should they fail.

Each G-SII is required to hold an additional buffer of Common Equity Tier 1 (CET1) capital between 1 percent and 3.5 percent. The G-SII buffer's purpose is to ensure G-SIIs maintain additional capital to absorb potential future losses.

This buffer was phased in from January 2016, with full implementation by January 2019. The figures released Monday will take effect in 14 months' time.

Several other banks on the list will have to hold an increased buffer including Citigroup, Bank of America Merrill Lynch and Wells Fargo. Endit