A senior Federal Reserve official on Tuesday proposed a series of “broad and material” changes to new banking rules, tempering plans for tighter regulation and supervision.
The Fed first issued the proposed changes for banks with at least $100 billion in assets last year as part of a global push to raise capital requirements that were found to be inadequate in the run-up to the 2007 global financial crisis.
Capital requirements are the financial buffers that banks must hold to protect themselves from potential losses.
The Fed has received a lot of backlash to its proposals, including criticism from some in the banking industry who viewed the proposed changes as too costly for the industry.
Speaking in Washington on Tuesday, Fed Vice Chairman for Supervision Michael Barr said “broad and substantial changes to the proposals are needed” to address some of those concerns and recommended re-proposing the new rules.
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Barr’s new proposals would increase capital requirements for the largest banks, known as Global Systemically Important Banks (G-SIBs), by 9%, up from 19% in the original proposals.
Other large banks will see a smaller increase in their capital requirements, equivalent to between 3 and 4 percent over the long term, while the rest of the banks subject to the rules will see their capital requirements increase by 0.5 percent.
In a marked departure from last year’s proposals, Barr suggested that smaller banks with between $100 billion and $250 billion in assets should not be affected by the new rules, “but the requirement to recognize unrealized gains and losses on their securities in supervisory capital”.
Source: AFP