US regulators propose higher capital standards for big banks
2013-07-10 17:54:46
Federal regulators proposed on Tuesday the eight largest US banks have to boost their leverage ratio to five percent, higher than the three percent benchmark by the Basel III rules.
The Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) proposed that those most systemically significant U. S. banks should maintain a tier one capital leverage buffer of at least five percent. In addition, the bank's deposit-holding subsidiaries would have to increase that ratio to six percent.
The federal regulators believe a strong capital base at the largest banks can shrink their risk to the economy in the light of a repeat of the 2008 crisis.
The proposal, if adopted, would take effect on January 1, 2018. The rule will apply to the eight biggest US banks, including Goldman Sachs, Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, Morgan Stanley, Bank of New York Mellon and State Street Bank.
In a separate rulemaking, The FDIC and OCC also adopted the three percent benchmark set by the 27-nation Basel Committee on Banking Supervision in 2010. The Federal Reserve approved the final rule last week.
"With the new capital rule, the federal banking agencies are taking an important step to strengthen the banking system and protect it from future financial crisis," said Comptroller of the Currency Thomas Curry.
Most US banks are required to abide by the three percent leverage ratio on January 1, 2015, but the largest internationally active banks are required to apply the rule on January 1, 2014, according to the final rule.