FDIC rule means stricter controls over US banks
The Federal Deposit Insurance Corporation has proposed changes to bank regulations that are stricter than international capital standards.
Eight biggest banks in America now face a 5% leverage ratio requirement with 6% on insured depository subsidiaries. In 2010 the Basel III standard for leverage ratio requirements was just 3%, demonstrating an increase of 2-3%.
It is applies to derivatives, loan commitments, and other off-balance sheet items. In particular the following banks and financial institutions will be affected by the change: Morgan Stanley MS +2.25%, Goldman Sachs Group GS +2.03%, Bank of America BAC +1.88%, State Street STT +1.5%, Citigroup C +1.39%, The Bank of New York Mellon BK +0.76%, JPMorgan Chase JPM +0.35%, and Wells Fargo WFC -0.3%.
Banks appear to be taking this leverage rise in their stride. Sandler O’Neill & Partners analyst Jeff Harte said that “Most of the banks are close to this level, if not at it already [. . . and it] should be achievable near term.”
The tighter regulation and higher capital requirements aims to strengthen the American banking system and ensure it has the ability to weather any future economic or financial problems. It is not due to come into effect until 2018.