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US Regulators to Raise Capital Requirements for Banks

Capital Requirements

BNR – The Wall Street Journal reported on Monday that US regulators are planning to tighten restrictions on capital requirements for giant banks.

The measure is intended to strengthen the financial system’s resilience following a string of small bank collapses this year. Furthermore, it has the potential to increase US capital requirements by 20% on average.

Proposed Modifications on Capital Requirements

According to the WSJ, regulators are on pace to propose the modifications as soon as this month. The journal cited sources acquainted with the situation.

Last month, the top regulatory official at the United States Federal Reserve told Congress that the central bank will likely publish its proposal to tighten bank capital requirements this summer and guarantee supervisors more aggressively investigate lenders in the aftermath of bank collapses this summer.

Michael Barr, the Fed’s Vice Chair for Supervision, stated that the central bank was closely evaluating regulation modifications for bigger regional banks. According to the WSJ, the specific amount of capital required will be determined by the bank’s operations.

Impact on Megabanks

The biggest hikes are anticipated to hit US megabanks with significant trading operations.

According to the WSJ, banks such as Morgan Stanley and credit card company American Express may require hefty capital increases. These are financial institutions that rely largely on fee income, such as investment banking or wealth management.

Morgan Stanley and American Express did not reply to requests for comment right away.


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