Federal Reserve Board approves rules requiring banks to set aside more capital
By Danielle Douglas
The Federal Reserve Board on Tuesday ordered banks to set aside more capital as a cushion against losses, bringing the United States in line with developing international standards and opening the door for a set of tougher rules for the nation’s biggest financial institutions. Almost all banks already meet the requirements the board unanimously approved Tuesday, but the new capital rules are only the beginning. Fed governor Dan Tarullo said the board plans to issue four proposals in the coming months to ratchet standards up even higher for banks deemed “systemically important,” including JPMorgan Chase and Goldman Sachs. The rules represented a win for regional and community banks, which lobbied for exemptions with the argument that they did not cause the financial crisis and are a critical source of funding for small businesses. “The new standards will mollify community banks and, with them, congressional critics of this aspect of the U.S. standards,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, an independent banking consulting firm. “Those advocating for far higher leverage rules for the biggest U.S. banks will remain dissatisfied, but not for long.”