U.S. Fed Agrees Basel III Banking Rules
The U.S. Federal Reserve on Thursday signed off on proposed new regulations to bring U.S. banks in line with the Basel III global standards, aimed at giving banks more crisis-resistant footings.
The U.S. rules will give bank holding companies and savings and loans companies with at least $500 million in assets until 2019 to meet the new capital rules, which have met resistance from banks as too hefty.
The rules tighten the definitions of bank capital and set new minimum levels: a seven percent base of common equity, including 4.5 percent of risk-weighted assets and another 2.5 percent "capital conservation buffer'.
Such a cushion, far larger than that required of banks now, should, when combined with other new U.S. regulations, "enhance their ability to continue functioning as financial intermediaries, particularly during stressful periods," the Fed said.
"This, in turn, should improve the overall resiliency of the banking system."
The push for globally harmonized, better regulation and stronger capital bases for banks has gained strength since the 2008 crisis exposed deep weaknesses across the interlocked global financial system.
But banks especially in the United States have fought the rules as too burdensome, limiting their potential to make money.
The Federal Reserve Board accepted the rules, a first step in putting them in place. Banks and others will still have 90 days to push for changes, and after that they will have to be agreed by other U.S. regulatory bodies.