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Fed Rules Redefining Bank Oversight Said to Be Issued This Week - BusinessWeek
Created on Monday, 19 December 2011 19:27Category: Financial News Highlights
December 19, 2011, 9:16 PM EST
By Cheyenne Hopkins
Dec. 19 (Bloomberg) -- The Federal Reserve will issue capital and liquidity rules this week reshaping supervision of the riskiest, largest banks and those with more than $50 billion in assets, a government official familiar with the matter said.
The Dodd-Frank Act requires the Fed to impose heightened standards including stricter capital levels for systemic banks with over $50 billion in assets and non-bank systemic institutions. The stricter standards also target liquidity, risk management structure, credit reporting, concentration limits, stress tests, contingent capital and short-term debt limits.
“The Fed is raising requirements as firms get bigger in part to reduce their systemic footprint,” said John Dugan, a partner at Covington & Burling LLP and a former comptroller of the currency. “They are creating disincentives to growth and complexity. It definitely creates more cost the bigger you get.”
The Fed’s rules will not be more stringent than international capital standards agreed to in Basel, Switzerland. Fed Governor Daniel Tarullo cited a “goal of congruence” between the Basel standards and the Fed’s work on rules under Dodd-Frank, which overhauls banking regulation, in a June 3 speech.
The Basel Committee on Bank Supervision agreed earlier this year that global banks such as Goldman Sachs Inc. and Deutsche Bank AG whose failure could send shock waves throughout the financial system should apply a systemic risk surcharge of 1 percentage point to 2.5 percentage points.
Tarullo has said he would have preferred a higher capital surcharge than the 2.5 percentage points agreed upon by international regulators in Basel, Switzerland, this year.
--Editors: Kevin Costelloe, Carlos Torres
To contact the reporters on this story: Cheyenne Hopkins at This e-mail address is being protected from spambots. You need JavaScript enabled to view it. ;
To contact the editor responsible for this story: Christopher Wellisz at This e-mail address is being protected from spambots. You need JavaScript enabled to view it.
Courtesy Google News