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Stricter rules targeting big banks to be proposed

Tue., July 9, 2013

WASHINGTON – Regulators want to require eight of the largest U.S. banks to meet a stricter measure of health to reduce the threat they pose to the financial system.

The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are expected to propose today that banks increase their ratio of equity to loans and other assets from 3 percent to 5 or 6 percent.

Equity includes money banks receive when they issue stock, as well as profits they have retained.

The rule would apply to eight U.S. banks considered so big and interconnected that each could threaten the global financial system: Goldman Sachs, Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, Morgan Stanley, Bank of New York Mellon and State Street Bank.

The move follows action the Fed took last week to increase the capital large banks must hold as a cushion against risk. Other regulators are also expected to adopt that rule. It would require the banks to maintain high-quality capital equal to 4.5 percent of their loans and other assets.

The higher capital requirements were mandated by Congress in the financial overhaul law. They also meet international standards agreed to after the financial crisis.

Banks have lobbied to ease the requirements for higher capital, which they say could hamper their ability to lend.


 

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