Fed Lifts Capital Requirements for Banks
By Ryan Tracy, Victoria McGrane and Justin Baer
The Federal Reserve sent a message to the largest U.S. financial firms: Staying big is going to cost you. The Fed’s warning, articulated in a pair of rules it finalized Monday, is among the central bank’s starkest postcrisis regulatory moves pressing Wall Street banks to reconsider their size and appetite for risk. For Wall Street banks and their investors, the emerging regime presents a series of choices: specifically whether to pay the cost of new regulation, which will fall to the bottom line, or change their business models by shedding businesses or withdrawing from certain markets, such as owning commodities. The Fed “clearly intends the very largest U.S. banks to buckle under this new capital regime, restructuring quickly and dramatically,” said Karen Petrou, a managing partner at Federal Financial Analytics, a policy-analysis firm. J.P. Morgan Chase & Co., the largest U.S. bank with assets worth $2.449 trillion, will have to maintain more capital than any of its peers, with its minimum capital requirement raised by 4.5% of assets under management as a result of the new rule.