The Federal Reserve on Tuesday approved stricter capital regulations for banks, part of a long-term effort to forge a global agreement designed to prevent a repeat of the 2008 financial meltdown. The new standards, part of the so-called "Basel III accord" (named after the city in Switzerland where many of the negotiations on the accord were first held), double the minimum ratio for capital at commercial banks. The new ratios are designed to ensure that banks are sufficiently cushioned against financial shocks and able to continue operating during "severe economic downturns." The rules also change the way risks of certain assets are calculated. Banks had lobbied against the new rations and the new calculation methods, saying it would restrict their ability to lend. "With these revisions to our capital rules, banking organizations will be better able to withstand periods of financial stress, thus contributing to the overall health of the U.S. economy," Fed Chairman Ben Bernanke said in a statement. Most banks are already in compliance with the rule, according to the Fed, though it estimates about 100 banks will need to raise roughly $4.5 billion in capital by 2019. The new rules simplify the risk calculations for mortgages, a process that community lenders had argued was too complex and would limit their ability to provide home loans. Community and regional banks comprise more than 90% of U.S. lenders, according to the Federal Deposit Insurance Corp (FDIC). The Fed unanimously approved the 792-page set of standards, which were mandated by the 2010 financial overhaul law. The FDIC and the Office of the Comptroller of the Currency are also expected to approve the new standards. Contributing: The Associated Press
Posted on: Wed, 03 Jul 2013 21:45:39 +0000
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