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Alternative Market Briefing

The Fed proposes new risk rules for banks

Friday, June 08, 2012

Bailey McCann, Opalesque, New York: The US Federal Reserve (Fed) issued two announcements on upcoming risk rules for banks. The rules impact capital requirements banks must maintain in order to participate in market activities such as lending. Available capital and risk for banking institutions have been front and center in discussions about the future of the US financial system and the overall health of its banks since the 2008 crisis.

The fed is inviting comment on three proposed rules involving capital and risk requirements. The proposed rules would implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The use of Basel III reforms speaks to a growing global regulatory framework emerging within centralized banking institutions in developed markets.

Under the terms of the new rules, a new minimum common equity tier 1 ratio of 4.5% of risk-weighted assets and a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets would be established. The the minimum tier 1 capital ratio would also increase from 4% to 6% of risk-weighted assets for banks with $500m or more in total consolidated assets. Limita......................

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