Tougher rules sought for big banks

NEW YORK – The Federal Reserve on Tuesday said the largest U.S. banks and financial companies should hold extra cash on their balance sheets to cushion themselves against financial crises.

The proposal by the chief U.S. banking regulator will affect banks with more than $50 billion in assets. There are even stricter rules for companies with over $500 billion in assets such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc.

Fed officials didn’t give a timeline for when the rules will be implemented but said the final rules will be released only after regulators have a chance to incorporate comments from the public. The Fed is accepting comments for 90 days.

The rules are part of new regulation proposed under the Dodd-Frank Act, which was passed last year.

The rules call for banks with more than $50 billion in assets to hold cash that is worth at least 5 percent of the value of their assets. The cash will cushion them against bad loans and investments.

The larger banks and institutions with more than $500 billion in assets will also have to set aside 10 percent of the value of any lending or trading between each other.

The Fed also adopted rules for smaller banks with more than $10 billion in assets. These banks will have to undergo stress tests conducted by their regulators to ensure that they are adequately prepared for an economic downturn.