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Share Price: 51.76
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Bank of England hints at size of new bond buffer for big banks

Thu, 24th Jul 2014 13:36

* UK banking watchdog indicates size of new bond buffer

* BoE to consult on implementing new EU bank law

By Huw Jones

LONDON, July 24 (Reuters) - Britain's biggest banks, such asBarclays and HSBC, will need to build up abuffer of loss-absorbing bonds at least as big as the capitalthey already hold to cushion against shocks, according to asenior Bank of England official.

These bonds could be used if a bank went bust to providecash to help keep key parts of the bank afloat while it isrestructured.

The so-called "bail-inable" bonds are part of plans bypolicymakers around the world to prevent taxpayers having to payfor rescues of banks deemed "too big to fail" as happened duringthe 2007-2008 financial crisis.

Andrew Gracie, executive director of resolution at the Bankof England, Britain's main banking watchdog, gave an earlyindication of how much banks would need in a speech last weekbut only made available on Thursday.

Gracie said the buffer must be, at a very minimum,sufficient to restore the lender's basic capital requirement.

Under new global capital rules, banks have to hold capitalequivalent to 7 percent of their risk-weighted assets.

He said an even bigger amount of bonds might be needed atthe largest banks to ensure the restructured bank issustainable.

"For a bank that has undergone resolution to command marketconfidence, it is likely to need at least as much capital asother banks in the market," Gracie said.

Most major banks now have a basic capital buffer of about 10percent or above to reassure investors about their financialhealth.

Gracie's words carry clout as under a new European Unionbank resolution law, that comes in from next year, nationalsupervisors, such as the Bank of England, will have the power totell banks how many bail-in bonds they need.

The EU law sets out the powers and processes needed to winddown stricken banks. The Bank of England on Thursday began apublic consultation on implementing the law. It is not yetdecided what type of bonds will qualify as "bail-in" debt.

At the global level, leaders of the Group of 20 economies(G20) will meet in November and hope to reach a deal on how biga cushion of bail-in debt the world's top 29 banks must hold.

But the global regime on bail-in bonds will not be legallybinding, unlike the EU law which will make these bonds arequirement for banks that national supervisors decide are bigenough to need them.

Britain's Barclays, HSBC and RBS come under thescope of both the global and EU bail-in rules. (Reporting by Huw Jones. Editing by Jane Merriman)

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Baltimore bridge collapse likely to result in multibillion-dollar insurance claims -Lloyd's of London

LONDON, March 28 (Reuters) - The collapse of Baltimore's Francis Scott Key Bridge is likely to lead to a multi-billion dollar insurance loss, the chairperson of commercial insurance market Lloyd's of London said on Thursday.

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27 Mar 2024 14:42

Bank of England steps up scrutiny of private equity and bank valuations

LONDON, March 27 (Reuters) - The Bank of England said on Wednesday it was taking a deeper look at risks from the opaque private equity sector, and why valuations of Britain's main banks are "subdued" compared with international peers.

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21 Mar 2024 10:28

TOP NEWS: Virgin Money and Nationwide agree terms of acquisition

(Alliance News) - Nationwide Building Society on Thursday said that it had finalised terms for its acquisition of Virgin Money UK PLC, and set out the details of the deal set to create "the second largest provider of mortgages and savings in the UK".

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20 Mar 2024 08:44

Paypoint and Lloyds Banking Group extend cards partnership agreement

(Alliance News) - Lloyds Banking Group PLC will become the main card acquiring partner for PayPoint PLC under a deal announced on Wednesday.

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5 Mar 2024 09:55

IN BRIEF: Darktrace hires former Trainline HR head as new CPO

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London close: Stocks start the month with positive close

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26 Feb 2024 16:09

Director dealings: Lloyds Banking chairman makes share purchase

(Sharecast News) - Lloyds Banking Group revealed on Monday that chairman Robin Budenberg had acquired 1.0m ordinary shares in the FTSE 100-listed financial services giant.

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26 Feb 2024 12:33

IN BRIEF: Lloyds Chair Robin Budenberg buys GBP455,000 in shares

Lloyds Banking Group PLC - Edinburgh-based financial services firm - Chair Robin Budenberg buys 1.0 million shares at GBP0.4549, worth GBP454,925, in London on Friday.

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26 Feb 2024 09:07

LONDON BROKER RATINGS: Jefferies raises ITM Power to 'buy'

(Alliance News) - The following London-listed shares received analyst recommendations Monday morning and Friday:

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23 Feb 2024 10:13

IN BRIEF: Lloyds launches GBP2 billion share buyback programme

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23 Feb 2024 09:19

LONDON BROKER RATINGS: Barclays raises Breedon but cuts Domino's Pizza

(Alliance News) - The following London-listed shares received analyst recommendations Friday morning and Thursday:

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22 Feb 2024 16:26

London close: Stocks rise amid raft of solid earnings

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22 Feb 2024 09:59

CORRECT: Lloyds profit rises but books GBP450 million probe provision

(Correcting sum of Lloyds Banking Group PLC's final dividend.)

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22 Feb 2024 08:24

TOP NEWS: Lloyds profit rises but books GBP450 million probe provision

(Alliance News) - Lloyds Banking Group PLC on Thursday reported an annual profit surge and announced a new share buyback, though it said it has booked a provision in connection to a UK watchdog probe on historic motor finance arrangements.

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22 Feb 2024 07:49

LONDON BRIEFING: Lloyds sets aside GBP450 million for UK motor probe

(Alliance News) - Stocks in London are set to higher on Thursday, as earnings from Nvidia, at the heart of an artificial intelligence boom, did not disappoint.

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