Large U.S. Banks Face Tougher-Than-Global Capital Rule
By Jesse Hamilton, Ian Katz and Yalman Onaran
Eight of the biggest U.S. banks are about to find out just how risky the Federal Reserve thinks they really are. Global regulators have already agreed that the world’s biggest banks, including MPMorgan Chase and Citigroup Inc. need to have extra capital to absorb losses in a crisis. Fed Governor Daniel Tarullo has said the U.S. requirement should be more stringent than the international standard and take into account how banks borrow money to determine how much more capital they need. The Fed proposal, to be announced today, may lower returns for shareholders of U.S. banks compared with firms in other parts of the world, according to analysts. The extra capital requirement could be heavier for firms such as Goldman Sachs Group Inc. and Morgan Stanley that rely more on markets for short-term funding, instead of looking to depositors. “The U.S. once again chooses to go its own way and exceed international minimums,” said Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc. “We don’t know yet how it’s going to be structured, but if they squeeze the big banks too much, they’ll force some out of some businesses.”