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By Huw Jones
LONDON, Sept 24 (Reuters) - Global regulators meet in Londonon Friday to agree a rule on stopping banks being "too big tofail" by requiring them to hold enough equity capital and bondsto avoid taxpayers being called on in a crisis.
The Financial Stability Board (FSB), chaired by Bank ofEngland Governor Mark Carney, wants the world's biggest banks tohave enough funds to tap when in trouble.
The proposed rule is known as total loss absorbency capacityor TLAC, and is seen by Carney as the last major reform afterthe 2007-09 financial crisis forced governments to shore uplenders.
The rule will apply to nearly all the 30 big banks the FSBhas already deemed to be "globally systemic" such as GoldmanSachs, Deutsche Bank and HSBC.
Under the original proposal, the banks would hold TLAC, madeup of capital and bond issuance, equivalent to 16 to 20 percentof their risk-weighted assets, when written down.
The TLAC figure would include the 10 percent or so ofcapital to risk-weighted assets the big banks already hold underexisting rules.
The FSB is made up of treasury officials, regulators andcentral bankers from the Group of 20 economies (G20) and hasfaced splits over how tough the TLAC reform should be.
A compromise has been proposed to phase in the newrequirement so that banks would hold TLAC of 16 percent from2019, rising to 20 percent by 2022 or later.
This would be an alternative to a single, fixed figure forTLAC from 2019, as initially foreseen.
Also under the original proposal, TLAC must be equivalent todouble the global minimum leverage ratio, currently set at 3percent. A leverage ratio is a broad measure of capital to allof a bank's assets on a non-risk weighted basis.
However, global banking regulators are in separatediscussions on whether the 3 percent minimum should be higherand won't make a final decision until 2016 or later, creatinguncertainties for banks having to prepare for TLAC.
A banking source said the FSB may agree to continue withdoubling the current 3 percent leverage ratio for TLAC, andrevisit this calculation once regulators have decided on a finalminimum ratio.
"I am more optimistic they will reach a deal on Friday," thesource added.
UBS and Bank of America have said they can meet the TLACrequirement well ahead of 2019, if not already. A deal on Fridaywould need endorsement from G20 leaders meeting in November. (Reporting by Huw Jones; editing by Adrian Croft)
