As expected, the Basel Committee on Banking Supervision unveiled a proposal that would substantially hike capital requirements on large banks deemed "too big to fail". The new rule calls for an additional layer of capital held in reserve of between 1 and 2.5 percent. That's in addition to the proposed minimum capital ratio of 7 percent.

For "too big to fail" banks that are growing fast or engaging in risky behavior, the additional capital requirement could be 3 percent. That top rate is not likely to be imposed on any banks, and some see it as more symbolic than anything. Still, quite a few banks will be reserving at the 2.5 percent ratio, including Bank of America, JPMorgan Chase and Citigroup as well as HSBC, Deutsche Bank and others.

This new capital requirement has caused a lot of controversy at home and abroad, and lobbyists will be stepping up their efforts. The basic issue is at what point the capital requirements get too big that they choke off growth. The Basel Committee will issue more details in July, giving the industry and regulators a final chance to weigh before voting on them. After that, regulators will designate the "too big to fail banks"--the "systemically important" ones--which will be no easy task. The new rules will not kick in until 2019.

For more:
- here's a Financial Times article

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Bankers meet ahead of Basel III