| | | Big Banks Facing More Rules As Fed Eyes Surcharge
By CIARAN McEVOY, INVESTOR'S BUSINESS DAILY
Big U.S. banks can expect tougher capital requirements than their foreign counterparts will face, as regulators seek to reduce the risk of a bank failure bringing down the economy, a Federal Reserve official said Tuesday.
The surcharge that large American lenders will pay exceeds the requirement of the Basel Committee on Banking Supervision, Fed Gov. Daniel Tarullo told the Senate Banking Committee. Basel is an international forum that seeks to improve global banking guidelines.
"We believe that more needs to be done to guard against short-term wholesale funding risks," Tarullo said. "While the total amount of short-term wholesale funding is lower today than immediately before the crisis, volumes are still large relative to the size of the financial system."
The requirement — labeled a capital surcharge — was agreed to by global regulators in 2011 and requires giant banks to boost their high-quality capital by a margin of 1 to 2.5 percentage points, as calculated by the bank's relative riskiness. Twenty-nine banks — eight of them based in America — are required to meet the requirement. The U.S. rules, though not spelled out, promise to be even tougher than the Basel standards.
In global regulators' November 2013 list of banks set to face capital surcharges due to their systemic importance, JPMorgan Chase (NYSE: JPM) and HSBC Holdings (NYSE: HSBC) were at the top.
It's the latest hurdle put in place for big banks, which are facing the challenge of finding new avenues for growth in light of the increasingly watchful eye of government regulators, liquidity requirements and gargantuan legal settlements stemming from banks' role in the housing meltdown.
JPMorgan shares fell 1.3% in the stock market today. Bank of America (NYSE: BAC) shares dropped 0.7% while Goldman Sachs (NYSE: GS) fell 1% and Morgan Stanley (NYSE: MS) lost 1.7%. |
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