hungprep
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‘Fed Proposes New Capital Rules for Banks’ – from The New York Times, December 20, 2011
‘Under the proposals, which will be open for public comment until March 31, banks with more than $50 billion in assets would be required, for now, to maintain a cushion equal to 5 percent of assets even during periods of unexpected stress. That standard is up from 4 percent previously and from much lower levels maintained by some large banks during the growth of the housing bubble.
‘That 5 percent is also the same level that was outlined by the Fed last month when it laid out plans for another round of bank stress tests. But the Fed also warned that banks will be required to match significantly stricter international requirements in the near future, including a larger amount of required capital based on a bank’s overall asset size.
‘The international standards, known as the Basel III accords, are expected to set capital requirements for the largest multinational financial institutions at 7 percent of capital plus a surcharge of up to 2.5 percent depending on a bank’s overall risk levels. Those standards are not expected to be phased in until 2016, at the earliest.
‘The Fed’s proposed rules also incorporate triggers intended to provide early warnings that a bank might be sliding into financial trouble. Those triggers would activate restrictions on growth, capital distributions and dividends, as well as limit executive compensation and asset sales.’ – by Edward Wyatt
‘A Fight to Make Banks More Prudent’ – the story of Philipp M. Hildebrand and his effort to establish the so-called ‘Basel III’ rules, by Jack Ewing in this morning’s The New York Times
‘The debate centers on an international accord that most people outside the industry have never heard of, the so-called Basel III rules. The core issue and main point of dispute is capital — the money that banks accumulate through issuing stock and holding onto profits, money that they do not have to repay [Italics added for emphasis]. The regulators want banks to finance their operations with more capital and less borrowed money. Advocates argue that the bigger the capital buffer, the greater the stability of the financial system. But financing operations from capital, rather than borrowing money, is less profitable, and that means lower bonuses.’
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‘Under the proposals, which will be open for public comment until March 31, banks with more than $50 billion in assets would be required, for now, to maintain a cushion equal to 5 percent of assets even during periods of unexpected stress. That standard is up from 4 percent previously and from much lower levels maintained by some large banks during the growth of the housing bubble.
‘That 5 percent is also the same level that was outlined by the Fed last month when it laid out plans for another round of bank stress tests. But the Fed also warned that banks will be required to match significantly stricter international requirements in the near future, including a larger amount of required capital based on a bank’s overall asset size.
‘The international standards, known as the Basel III accords, are expected to set capital requirements for the largest multinational financial institutions at 7 percent of capital plus a surcharge of up to 2.5 percent depending on a bank’s overall risk levels. Those standards are not expected to be phased in until 2016, at the earliest.
‘The Fed’s proposed rules also incorporate triggers intended to provide early warnings that a bank might be sliding into financial trouble. Those triggers would activate restrictions on growth, capital distributions and dividends, as well as limit executive compensation and asset sales.’ – by Edward Wyatt
‘A Fight to Make Banks More Prudent’ – the story of Philipp M. Hildebrand and his effort to establish the so-called ‘Basel III’ rules, by Jack Ewing in this morning’s The New York Times
‘The debate centers on an international accord that most people outside the industry have never heard of, the so-called Basel III rules. The core issue and main point of dispute is capital — the money that banks accumulate through issuing stock and holding onto profits, money that they do not have to repay [Italics added for emphasis]. The regulators want banks to finance their operations with more capital and less borrowed money. Advocates argue that the bigger the capital buffer, the greater the stability of the financial system. But financing operations from capital, rather than borrowing money, is less profitable, and that means lower bonuses.’
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