Leading figures from banking and finance are today meeting in Basle, Switzerland, with a view to confirming a new worldwide capital reserve figure, in a bid to help prevent future capital shortages of the scale of those felt during the recent global banking crisis.
The meeting, established in line with G20 pledges to resolve the deep-rooted impact of bank failures, is to establish a new minimum capital reserve figure of 7%, a 3 percentage point rise from the current 4% level, which it is hoped will help banks more readily absorb the heat from future defaults on riskier investments.
While the UK at present imposes a minimum of 8% capital reserves, the move will help ensure continuity of reserve levels across the developed world, to prevent future catastrophic banking downturns from spreading out beyond the industry.
The pledge will still require sign-off at the next G20 gathering, but it is expected that the new commitment to higher capital reserves will pave the way for future rises towards the more stringent figures of 10% being suggested by the US, Switzerland and the UK.
In the short term, it is anticipated that the move could hamper lending even further, with many institutions still currently struggling to find the capital to fund their existing lending commitments.