Big banks to get higher capital requirement

Increase in leverage ratios means biggest banks will have to add $68 billion to level

WASHINGTON—The nation’s eight largest banks will have to add about $68 billion in additional capital to meet rules approved Tuesday intended to help banks weather losses during periods of market stress, federal regulators said.

The so-called “leverage ratio” approved by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. will mean the largest banks, including Citigroup Inc. and Goldman Sachs Group Inc., will be required to maintain well above the global minimum levels of capital held against all assets on their books.

Reuters

Federal Reserve Chair Janet Yellen talks at a news conference following the March Federal Open Market Committee meeting while at the Board of Governors of the Federal Reserve Sysytem in Washington, March 19, 2014.

The requirement would be more aggressive than levels set by global regulators as U.S. agencies ratchet up pressure on large, complex banks to ensure they can survive periods of turmoil without a government rescue.

“The final rule is an important part of the Board’s package of enhanced prudential standards for the most systemic U.S. banking firms—a package that is designed to materially reduce the probability of failure of these firms and to materially reduce the damage that would be done to our financial system if one of these firms were to fail,” Federal Reserve Chairwoman Janet Yellen said.

The eight bank holding companies would have to hold loss-absorbing capital worth more than 5% of their assets to avoid limits on rewarding shareholders and paying bonuses, and their FDIC-insured bank subsidiaries would have to keep a minimum leverage ratio of at least 6% or face corrective actions. That is higher than the 3% agreed upon under global standards, which U.S. regulators have seen as not tough enough.

Source:

www.marketwatch.com