Fitch ratings has called for a huge increase in capital reserves at the world’s biggest banks today as the markets reel from the run on Spain’s banks. The agency recommended banks across the world raise a total of $556 billion an increase of 23 percent over what the banks are currently holding.

Fitch made the recommendations on 29 of the world’s systemically important banks. That list includes Goldman Sachs Group (NYSE:GS), HSBC Holdings plc (LON:HSBA), Mizuho Financial Group Inc.  (TYO:8411), Bank of America Corp. (NYSE:BAC) Societe General S.A. (EPA:GLE), and JPMorgan Chase & Co. (NYSE:JPM).

Those banks are judged to be vital to the functioning of the global financial system and failure in any of the institutions would

The recommendation comes after crisis hit Spanish and Greek banks. Financial institutions in the European nations saw large levels of deposits removed in recent days. Bankia, a conglomerate of Spanish Banks formed in 2010 to help save the country’s financial system, saw more than 1 billion euro withdrawn in the last week alone. The firm’s shares tumbled today by more than 25%.

Spain’s borrowing costs have risen in its latest bond auction held today. The repercussions for the European economy have not yet been worked in though it seems the country will require more assistance in the future if it is to manage to pay its way. Moody’s is currently reviewing the banks and may downgrade 21 in Spain as borrowing costs jump for the institutions.

Banco Santander S.A. (NYSE:STD), a Spanish banking giant, is among the list of the most important 29 banks. It is not at as much risk from the current run on deposits in the country but suffers from the aura of the crisis.

Fitch now wants all of the world’s important banks to hold much more cash in reserve and has given the institutions until 2019 to meet the new requirements. Banks will have to hold onto future earnings and sell assets in order to achieve targets in line with the new ratios.

The new regulatory path being observed in the international financial system may be good for stability but it is bad for growth. The increase in the amount of money banks have to hold and simply sit on meant the firms will not be able to earn money on those reserves and will reduce profitability. The other option is leaving the institutions open to failure. It is this tradeoff that will dominate the institutions for the next several years.

After, and in the midst of, such a unique and deep financial crisis it is probable that regulators will swing too far toward stability leaving less room for growth and innovation. It may be some years before a correct balance is restored to the sector but it seems inevitable that right now government interference is going to grow.