This content is from: Innovation

Fed Supports 3% Basel Capital Surcharge

The central bank of the U.S. has voiced its support for moderate capital rules for leading global banks set forth by European regulators in an effort aimed at avoiding future bailouts, according to Bloomberg.

The central bank of the U.S. has voiced its support for moderate capital rules for leading global banks set forth by European regulators in an effort aimed at avoiding future bailouts, according to Bloomberg. The Federal Reserve is said to have agreed that the maximum capital surcharge in a proposal at the Basel Committee on Banking Supervision should be 3% for the largest global banks. That figure is being raised from 2%, and in certain tallies, added calculation buffers put that figure as high as 7% of assets weighted for risk.

Fed Governor Daniel Tarullo said on Jun. 3, “The enhanced capital requirementimplied by this methodology can range between about 20% to more than 100% over the Basel III requirements.” The news sent the BloombergEurope Banks and Financial Services Indexsharply lower, and Jason Goldberg of Barclays Capital warned, “A seven percentage-point surcharge for the largest banks would be a disaster.” Goldberg added about the reported agreement, “It will certainly restrict lending and curb economic growth if true.”

Click here to read the story from Bloomberg News.

Related Content