By Jonathan Davies
New rules to prevent banks that are 'too big to fail' from needing to be bailed out by government have been unveiled today (Monday).
The rules were set about by the Financial Stability Board (FSB), the global regulator. Mark Carney, chair of the FSB and governor of the Bank of England described the rules as a "watershed" moment.
The world's big banks will be required to hold bigger reserves to protect themselves from big losses and any possible future financial crisis.
When the global markets crashed in 2007-08, governments around the world spent billions to bailout their country's biggest banks. In the UK, Lloyds is still part-owned by the taxpayer.
Under the rules, the FSB said "global systemically important banks" should set aside 15-20% of their assets to protect themselves.
"Agreement on proposals for a common international standard on total loss-absorbing capacity for [big banks] is a watershed in ending 'too big to fail' for banks," said Mr Carney.
"Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved without recourse to public subsidy and without disruption to the wider financial system."
The FSB has identified 30 banks around the world that are 'too big to fail'. Of the UK banks, Barclays, HSBC, Standard Chartered and RBS are included. Lloyds Bank was removed from the list after its potential financial standing has fallen in recent years.
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