Fed Boosts Capital Rules for Banks, Hitting Stocks

The regulators are already requiring more like 8-10% capital from most banks, so raising the legal limit to 6% from 4% is inconsequential.

Fed Boosts Capital Rules for Banks, Hitting Stocks

June 7 (CNBC) — The Federal Reserve approved new rules Thursday for U.S. banks to set aside more money to cushion against unexpected losses, a key step in preventing another financial crisis.

The new rules require the nation’s largest banks to hold at least 6 percent of their assets in capital reserves, up from a minimum of 4 percent currently, by 2019.

The 2010 Dodd-Frank financial overhaul law—as well as an international agreement last year in Basel, Switzerland—require regulators raise capital requirements for banks.

The banks had lobbied vigorously against the proposals, saying setting aside so much money in reserve could limit what they could lend.

The rules are open to comment until September. They will be finalized after that.

Though the move was expected, financial stocks— including Bank of America and Morgan Stanley— fellsharply after the Fed approval was announced.