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'Too big to fail' banks named

'Too big to fail' banks named
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At the Cannes summit of the world’s leading economies, 29 banks have been named as being so important to the global financial system that they are likely to need to hold more capital reserves than their rivals.

Leaders said they will have to put in place a plan to allow them to be wound up without taxpayer help if they hit trouble.

Seventeen are from Europe, eight from the US, and just four from Asia.

They include Germany’s second-largest lender Commerzbank and Britain’s Royal Bank of Scotland which on the same day announced their latest quarterly profits had taken a hit from loans to Greece.

The aim is to ensure taxpayers will never again be called on to foot the bill in a major banking crisis.

Other elements there were approved included common tools for supervisors to wind up ailing banks and more intensive supervision for large lenders.

The international industry watchdog the Financial Stability Board also received G20 backing for plans for tighter regulations of the so-called “shadow banking” sector — that is the non-banking financing industry.

Earlier Royal Bank of Scotland said its third quarter profits slumped and it expects a tough fourth quarter.

That after it took a further hit on its Greek government bonds and sold most of its Italian bonds.

RBS has slashed its holdings of sovereign debt from Portugal, Italy, Ireland, Greece and Spain since the start of the year.

At the same time, Germany’s second-largest lender Commerzbank is accelerating a pullback from euro zone nations as it posted an almost eight hundred million euro third-quarter operating loss.

The bank which already needed one state bailout said it will refuse to make loans which don’t help its core markets Germany and Poland.

Euro zone banks will get back less than the half the money they have lent to Greece.

On Friday, Italian banking shares were among the biggest losers in Europe as the interest rate Rome had to offer to get investors to buy its government bonds hit the highest since the euro was created.

That came after Italy refused financial support from the International Monetary Fund.

Italian Prime Minister Silvio Berlusconi turned down an offer of funding from the IMF, which has placed the country under supervision as it struggles with a large debt mountain.