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The Federal Reserve proposed on Tuesday new capital and liquidity rules for the largest banks that would roll out in two phases and not likely go further than international standards.
The Fed said that both the capital and liquidity requirements required by last year's Dodd-Frank financial oversight law would be implemented in two phases.
The first phase would rely on policies already issued by the Fed, such as the capital stress test plan it released in November.
That stress test plan will require U.S. banks with more than $50 billion US in assets to show they can meet a Tier 1 common risk-based capital ratio of 5 percent during a time of economic stress.
The second phase for both capital and liquidity would be based on the Fed's implementation of the Basel III international bank regulatory agreement. That standard brings up the Tier 1 common risk-based capital ratio requirement to 7 percent, plus a surcharge of up to 2.5 percent for the most complex firms.
The Fed is waiting on the Basel Committee on Banking Supervision to flesh out its own liquidity recommendations before setting out U.S. requirements, but the central bank said it initially would hold U.S. banks to a qualitative liquidity standard.
The proposals released on Tuesday are mandated by the 2010 Dodd-Frank law, enacted in response to the financial crisis.
Under Dodd-Frank, the Fed is charged with providing more oversight of the largest U.S. financial firms. This includes all banks with more than $50 billion in assets, such as Goldman Sachs Group Inc., JPMorgan Chase & Co and Citigroup Inc..
It also includes supervision of any financial firm the government identifies as being important to the functioning of financial markets and the economy.
The government has yet to decide which non-banks, such as insurance companies and hedge funds, meet this standard.
The Fed said that when such companies are designated it may "tailor" the rules, which were drafted mostly with banks in mind, to better fit that particular company or industry.
The proposed rules also try to limit the dangers of big financial firms being heavily intertwined. It would limit the credit exposure of big banks to a single counterparty as a percentage of the firm's regulatory capital.
The credit exposure between the largest of the big banks would be subject to an even tighter limit.
The proposals will be put out for public comment through March 31, 2012.