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  • bluecheese4u bluecheese4u Jul 9, 2013 7:19 PM Flag

    Federal regulators propose leverage-ratio increases for big banks

    Federal regulators propose leverage-ratio increases for big banks

    Vicki Needham - 07/09/13 02:47 PM ET

    Congressional lawmakers expressed support on Tuesday for a proposal by federal regulators to ramp up requirements for the nation's eight largest banks to reduce the risks they pose to the financial system.

    The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) are proposing that the banks raise their leverage-ratio standards — equity vs. assets — to 5 percent from 3 percent as the "too big too fail" debate continues on Capitol Hill.

    The 5 percent threshold is higher than the 3 percent agreed on by international regulators.

    The proposed rule also would require the subsidiaries of insured banks to meet a 6 percent ratio to be considered "well capitalized."

    Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee, praised the proposal's adjustments.

    “During the Basel III rulemaking process, I pointed out some of the weaknesses in using overly complicated risk-based capital standards, and I’m happy to see that the regulators are moving forward on a new rule to constrain excessive leverage through the use of a more simple and effective ratio that will help curb a lot of the gaming that goes on with risk weights,” he said.

    Corker and a bipartisan group of senators have been pressing regulators to increase the requirements for the past several months.

    Sens. David Vitter (R-La.) and Sherrod Brown (D-Ohio) called the plan "a major step in the right direction of higher capital standards that so many have been pushing for."

    "It's encouraging that regulators are moving toward the standards in Brown-Vitter, which would end too-big-to-fail by ensuring that Wall Street megabanks can back up their risky practices," they said in a statement.

    The rule, if adopted, would take effect Jan. 1, 2018.

    But banks were less than pleased, arguing that the rule would not only h

 
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