Finance ministers and central bankers from the world's top economies backed on Saturday a mandatory capital surcharge on big lenders of up to 2.5 percent to be phased in from 2016, dealing a blow to banks hoping for a rethink or delay.
The communique from a meeting of G20 finance chiefs endorsed a 1-2.5 percent capital surcharge on top banks like Goldman Sachs, HSBC, Deutsche Bank and JPMorgan Chase.
The aim is to make sure they have enough capital to withstand market turbulence so that taxpayers won't have to rescue banks again in the next crisis.
A summit of the G20 leaders in Cannes, France in early November is set to give final approval to the surcharge plan and name the banks affected, known as global systemically important financial institution or G-SIFIs, G20 sources said.
Now that the framework applicable to G-SIFIs is agreed, we urge the Financial Stability Board to define the modalities to extend expeditiously the framework to all SIFIs, the communique said.
JPMorgan Chase Chief Executive Jamie Dimon has called the surcharge anti-American while insurers are battling against being saddled with one too, as are second tier banks.
The charge -- which will be in addition to a Basel III 7 percent minimum core capital buffer being phased in for all banks from 2013 -- is part of a wider package the G20 ministers endorsed on Saturday.
They also reaffirmed the timeline for Basel III in another blow to banks wanting a delay, saying they will crimp lending.
Banks will welcome confirmation from Germany's finance minister there is no chance of a global tax on financial transactions, though he urged Europe to push ahead with its own, a step Britain opposes.
Other elements backed on Saturday included common tools for supervisors to wind up ailing banks, compulsory living wills or resolution plans for every big bank, and more intensive supervision for large lenders.
The FSB, which formulates and coordinates financial regulation on behalf of the G20, has already drawn up criteria to determine which banks face a surcharge.
It has said 28 banks would be affected if the regime was introduced immediately but G20 sources said the Cannes summit may name up to 50 lenders. Canadian Finance Minister Jim Flaherty said there was no official list yet and he did not expect any Canadian banks to be on it.
FSB Chairman Mario Draghi steps down as chairman this month to become president of the European Central Bank. Asked if he was the lead candidate to replace him, Bank of Canada Governor Mark Carney told reporters: I hope so.
The FSB won G20 backing for its workplan to define the so-called shadow banking sector before thrashing out recommendations next year to regulate it.
Supervisors fear that as banks face tougher rules, risky activities could migrate to other parts of the financial system such as money market funds and special vehicles.
G20 presidency France lost its battle to introduce tough curbs on what it sees as speculation in food and energy commodity markets by imposing limits on the size of positions a trader can hold at any given time.
G20 ministers said recommendations from the International Organization of Securities Commissions (IOSCO), which groups national market watchdogs, on more transparency in commodity derivatives markets should be implemented by the end of 2012.
The IOSCO report falls short of mandating commodity position limits in the way the U.S. Commodity Futures Trading Commission is expected to do next week.
Ministers also asked IOSCO to make recommendations to improve the functioning and oversight of price reporting agencies for mid-2012.
They also want to make it easier to track traders.
We underscored our support for a global legal entity identifier system which uniquely identifies parties to financial transactions with an appropriate governance structure representing public interest, their communique said.
The Paris communique marked a turning point as the G20 begins to shift its focus from rulemaking to implementation of the welter of rules it set in train.
Its main tool will be a beefed up FSB.
To ensure that the FSB keeps pace with our ambitious financial regulation agenda, we commit to strengthen its capacity, resources and governance building on its Chair's preliminary proposals and call for first steps to be implemented by the end of this year, the communique said.
The ministers agreed to coordinate monitoring of Basel III, set up peer reviews of how the capital surcharge is introduced, and better coordinate their derivatives reforms which threaten to miss the end of 2012 deadline.
Draghi proposed more members from emerging markets and developing countries on the FSB's agenda-setting steering committee, G20 sources said.
He also wants representatives of finance ministries on the FSB steering committee to add political clout, sources said.
G20 ministers backed an FSB report on financial consumer protection principles authored by the OECD but called for further work on implementation issues.
(Additional reporting by Daniel Flynn and Randall Palmer in Paris, editing by Mike Peacock)