u.s. banks may be eating europeans<u+2019> lunch, but it isn<u+2019>t all good news for them. these days any growth in balance sheet or global reach risks aggravating perceptions that banks are too big to fail. that means higher capital charges as three u.s. banks and one chinese lender have found after the latest assessment by the financial stability board, the global body responsible for systemic risk. the changes make sense but they could sour the trans-atlantic debate on regulation when u.s. lenders already see european peers in general as undercapitalized. those deemed more risky are citigroup (which has become one of the two most systemically important banks in the world alongside j.p. morgan chase), bank of america , wells fargo and industrial & commercial bank of china . meanwhile, barclays and morgan stanley have had their charges cut, as has hsbc, which previously occupied the top slot with j.p. morgan. the point of these charges is to make taxpayer bailouts less likely<u+2014>a higher capital charge should give the riskiest banks more of a cushion again losses. the fsb, made up of the world<u+2019>s leading regulators, sets the charges annually, though they don<u+2019>t come fully into force until 2019. many regulators use the fsb<u+2019>s standards, but the u.s. federal reserve has taken a harsher view of systemic risk and is imposing higher charges on its biggest banks . j.p. morgan, for example, faces the steepest charge for systemic risk in the u.s., which will add 3.5 percentage points to its common equity tier 1 capital ratio requirements in 2019. that is much bigger than the 2.5 percentage point charge set by the fsb. the same is true for other u.s. banks, even after the increases announced monday for citigroup, bank of america and wells fargo. for barclays and hsbc, meanwhile, the cut in charges is a real benefit. for both, it will free up half a percentage point of capital, supporting future dividends. both banks have shrunk and simplified their balance sheets in the past year. but most interesting is how these changes might influence the regulation debate. global rule makers have come in for sharp criticism from european regulators and politicians for threatening higher capital requirements on european banks as charges for mortgages and corporate loans look likely to be increased . the german regulator last week said it would walk away from global rules if the changes went ahead. in the u.s., president-elect donald trump has pledged to dismantle some postcrisis regulations. the worry here is that global cooperation on banking regulation could now turn into global conflict. regulators have to be careful that ending too big to fail isn<u+2019>t the first casualty. write to paul j. davies at paul.davies@wsj.com
a global call on u.s. bank risks could sour debate - wsj
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