RULES will soon be finalized forcing the world’s top banks to hold enough liquid assets to cover between 16 and 20 percent of their liabilities since industry lobbying failed to persuade regulators to relax the plan.

    The Financial Stability Board (FSB) coordinates financial regulation for the Group of 20 (G20) economies and will finalize the rules by the end of September for endorsement by G20 leaders in November.

    The FSB wants the top 30 banks to hold enough equity and long-term bonds so that if they fall into trouble they have enough resources without calling on taxpayers.

    Major U.S. bank groups said in February the plan goes beyond what’s needed even at the lower end of the FSB’s range, but the calls appear to have been largely ignored.

    “What we understand is that it will be going ahead largely as expected,” a senior banking industry source said.

    “There will be tweaks here and there, but nothing substantial,” a G20 source added.

    The buffer of “total loss absorption capacity” or TLAC would come on top of core capital requirements.

    Standard & Poor’s has estimated that US$500 billion in bonds may have to be issued.

    Mark Carney, the Bank of England Governor who chairs the FSB, has said the reform is crucial to ending “too big to fail” banks and drawing a line under the 2007-09 financial crisis.

    Some banks like UBS and Bank of America have told analysts this month they are in a position to comply well ahead of the 2019 deadline, if not straight away.

    “We’re going to start issuing TLAC in the current quarter, in the third quarter, so we’re obviously not waiting to see the final regulations,” UBS chief financial officer Tom Naratil told reporters late Monday.

    “As we’ve indicated previously, it doesn’t really matter where it ends up, we feel that we’re well prepared to be able to address even the higher end of that band,” Naratil added.

    Regulators in Continental Europe where some banks are still building up core capital cushions, want a final TLAC figure nearer 16 percent, while the Federal Reserve wants it around 20 percent, bankers said.

    Settling for about 18 percent, as some bankers expect, will likely prompt the Fed to top this up with local requirements.

    “Once the TLAC details have been finalized, the sector will be looking at how this is implemented in key jurisdictions, including whether any will gold plate,” said Oliver Moullin, a director at European banking lobby AFME.

    The FSB, which had no comment, proposed that large banks from emerging markets like China be exempt from holding TLAC, but bankers say the final rule will likely say this is temporary.(SD-Agencies)