Regulators have agreed tough rules for banks that would force many institutions in Europe to raise tens of billions of euros in capital in coming months.

The rules will force banks to substantially improve the quality and extent of the capital buffers they hold to absorb shocks. At least half of the capital cushion must comprise common equity and retained earnings under measures agreed by the powerful Basel committee of central bank governors and regulators, say people familiar with the discussions.

The committee, whose meeting coincided with the G20, also agreed to put 'hard' limits on how much banks can borrow. It is likely to set a ceiling on borrowings of 25 times assets. There will be no exceptions for less risky assets.

Financial Times