Banks will be forced to store more cash to protect against another financial crisis following a decision by world leaders at the G20 summit in Canada.
The heads of state and finance ministers at the Toronto G20 summit agreed that in future banks should keep enough capital on their balance sheet to have withstood the aftermath of the 2008 banking crisis, which threw the UK into recession.
But the rules will be held off until 2012 in order to give the banks a chance to prepare for the new rules.
The G20’s communiqué said: "The amount of capital will be significantly higher, and the quality of capital significantly improved, when the new rules are fully implemented. This will enable banks to withstand, without government support, stresses of the magnitude associated with the recent financial crisis."
Another topic high on the agenda at the Toronto summit was Britain’s banking levy proposals, but an agreement could not be reached with other world leaders.
In last week’s Emergency Budget George Osborne announced that Britain’s banks would face extra taxation of up to £2billion annually to help repay the debt they owe to UK taxpayers for the bailout following the financial crisis.
However, only France and Germany agreed to adopt the UK levy, with other countries like Canada and the USA refusing to do so.
The statement released by the leaders says: “We agreed the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions, where they occur, to repair the financial system or fund resolution, and reduce risks from the financial system. We recognised that there are a range of policy approaches to this end.
“Some countries are pursuing a financial levy. Other countries are pursuing different approaches.”
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