The new rules are "a watershed in ending 'too big to fail' for banks," said Mark Carney, FSB chief and head of the Bank of England.
The new rules are meant to help avoid a repetition of the 2008 crisis sparked by the Lehman Brothers collapse, which shook the global financial sector to its core.
Numerous governments had to step in and save other large banks from tanking and dragging down entire economies in the process.
"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," Carney said in a statement.
Mega-banks, sometimes managing more than the total gross domestic product of the country hosting them, know that governments have no choice but to bail them out if they get into trouble.
"The knowledge that this can happen encourages (them) to take excessive risks and represents a large implicit public subsidy of private enterprise," the FSB said.
To avoid such risk taking at taxpayers' expense, FSB wants 30 such giant lenders, including Switzerland's largest bank UBS, Citigroup and HSBC, to increase their capital reserves equivalent to at least 16 to 20 percent of their risk-weighted assets.
The new rules double the amount of capital the banks will have to set aside to absorb losses.
In the wake the 2008 crises global banking regulations were already tightened.
Under the so-Basel III rules that are being gradually phased in, lenders are being required to hold a capital cushion of at least seven percent of the total risks they are carrying, with banks considered "too-big-to-fail" required to keep an additional cash stash of at least 2.5 percent.
The FSB has called for public input on the rules until February 2nd, and plans, along with the Basel Committee on Banking Supervision and the Bank for International Settlements to conduct "comprehensive impact assessment studies" to help fine-tune the initial implementation of the rules.
The final draft should be completed in time for a summit of G20 leaders at the end of 2015, the board said.
UBS
Watchdog seeks higher capital buffer for banks
The Financial Stability Board, a global banking watchdog, presented on Monday new rules that would push mega-banks to nearly double their financial buffers in order to shield economies and taxpayers if they collapse.
FRANCE
Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms
A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.
The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct.
The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.
The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.
In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.
The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.
They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.
In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.
UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.
It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.
The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.
'Milk tickets'
UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.
UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.
They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.
But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.
Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.
Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.
UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.
In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.
That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.
Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.
UBS has denied the charges and said it will defend itself “vigorously”.
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