Regulators propose big banks boost capital by 16%

U.S. regulators want the nation's biggest banks, those with assets of $100 billion or more, to boost their capital by an aggregate 16 percent. The lengthy proposal is based on the international Basel standard and has been long-awaited by the banking industry. If the proposals go into effect, it would be one of the biggest overhauls of U.S. banking regulation since the 2008 financial crisis. Yahoo Finance Senior Reporter Jennifer Schonberger explains the new proposals.

Video Transcript
- Well, US regulators have released a long-awaited proposal that would see the biggest banks boost their capital requirements. The measures, released by the Federal Reserve and FDIC, would boost those requirements for banks with at least $100 billion in assets by an estimated 16%. Yahoo Finance's David Hollerith has the details. David, talk us through this.

DAVID HOLLERITH: Yeah, it's a sweeping proposal we're looking at right now. More than a thousand pages. In aggregate, 16% increase to bank capital requirements. And these are for the large banks. Importantly, a lot of this is based off of the international Basel standards and have been interpreted by US regulators.

Newer things that have been added in include taking these requirements and sort of extending it to all banks above $100 billion in assets. So that sort of widens what has been a long-awaited regulatory change to something that's more of a reflection of things that have happened this year. Also importantly, the unrealized losses for available for sale.

Securities, which previously had been something that banks didn't have to account for, has been changed. So now that is a part of something that banks do have to account for. At a high level though, you know, this impacts the most-- the giants of the industry. That's those with large trading desks and also just coast-to-coast bank franchises. Their capital requirements are expected to rise 19% on average.

For the smaller-- I say smaller, but the banks with $250 billion assets or more. They're going to see their average capital requirements rise by about 10%. And then the smallest of this group, those between $100 and $250 billion assets, will see their capital requirements rise about 5% on average. So officials have argued that the changes are needed to improve the resilience and to better prepare banks for future losses. And that's what this is all about.

Again, the changes are going to affect the largest banks. But the new thing here, and it has a lot to do with what's happened over the past year, is that it's going to incorporate the smaller larger banks, I guess we would say, which looks roughly like the top 30 at this point. Now there is going to be a phase-in period, and banks are expected to be able to comment for the next 120 days on this. And we're sure to hear some feedback from what they think of the new rules.

But in general, we're looking at sort of a July 2025 period to begin these new rules to phase in for the banks. And then after that, sort of they will become official in 2028-- July 2028, excuse me.

- All right. We're going to be tracking closely that timeline there. David, thanks so much.


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