The Basel Committee has issues one important regulation to the top and most important central banks in the world to must hold up-to 2.5% in additional capital on their balance sheets to protect them in the event of any further global financial crisis.
The Basel Committee is the supervising body who sets standards, guidelines and recommends for the global banks. Currently 56 top central banks are enlisted as its member.
Last week Committee meeting held in Basel, Switzerland, and Jean-Claude Trichet, president of the ECB, the group that oversees the functions of Basel Committee told the media, “The agreements will help address the negative externalities and moral hazard posed by global systemically important banks.”
"The assessment methodology would be based on size, interconnectedness, lack of substitutability, global activity and complexity of the banks. The banks would have until 2019 to hit the higher levels of capital," Basel Committee issued a statement.
The plan to raise capital requirements will be reviewed by the Financial Stability Board and then be issued for public comment, the Basel Committee said. The Financial Stability Board is expected to issue the final notification next month.
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