RPT-Bank of England gives banks until 2020 to build buffers to prevent future taxpayer bailouts

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By Huw Jones

LONDON, Dec 11 (Reuters) - LONDON, Dec 11 (Reuters) -Britain's banks will have until 2020 to put in place an extrabuffer of funds that will be tapped in a crisis to shieldtaxpayers from having to bailout failed lenders again, the Bankof England said on Friday.

The BoE was setting out its new rules for how 400 banks andbuilding societies will have to hold an additional cushion ofloss-absorbing bonds on top of their core, mandatory capitalrequirements.

The rules, published for consultation, are based on aEuropean Union law that will require all banks across the28-country bloc to hold the extra buffer known as minimumrequirement for own funds and eligible liabilities or MREL.

The central bank estimated that the net shortfall of suchfunds is currently 26 billion pounds for the biggest banks suchas HSBC, Lloyds, Barclays and RBS, for whom it will cost some1.4 billion pounds a year to service.

The vast majority of MREL requirements will be met byre-issuing existing debt at banks.

The new rules are seen by policymakers as the final piece ofbanking regulation since the 2007-09 financial crisis to endso-called "too big to fail" banks.

"The implementation of MREL is a crucial step forward toensuring that any banks, large or small, carries sufficientresources to be resolved in an orderly way, without recourse topublic subsidy and without disruption to the wider financialsystem," BoE Governor Mark Carney said in a statement.

The aim is to ensure that the shareholders and bondholdersof a bank bear the losses when a lender goes bust.

The BoE said that depositors could, in some circumstances,also bear losses on amounts held in accounts above the 75,000pounds that is automatically insured under EU rules.

Banks will be told in the second quarter of 2016 what is theindicative amount of MREL they must hold by January 2020.

The lenders will be given some flexibility as to how theywill reach that level, the BoE said.

HSBC, Lloyds and Barclays have already been deemed to beamong the 30 global systemic banks who must hold a layer ofbonds, know as TLAC.

The BoE said their level of MREL will not be higher than theglobally-set TLAC but they must comply with a 2019 deadline. (Reporting by Huw Jones, editing by Andy Bruce) (Reporting by Huw Jones)