Fed proposes making banks keep a bigger financial cushion in line with global standards
The Federal Reserve wants U.S. banks to set aside more money to cushion against unexpected losses, a key step in preventing another financial crisis. The Fed governors voted 7-0 on Thursday to propose rules requiring all banks hold at least 7 percent of their assets in capital reserves. That’s up from a minimum of 2 percent currently required and in line with international standards. The rules are open to comment until September. They will be finalized after that. But some banks won’t have to meet the requirements until 2019. That’s because the rules have to be coordinated with international standards that are being phased in over the next seven years. The capital requirements for banks were mandated under the 2010 financial overhaul. Experts say most big banks already have increased their capital levels close to the stricter levels. For smaller banks, though, the increased capital requirements will be “a real wake-up call,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics in Washington.