WASHINGTON — Regulators are acting to require US banks to build a sturdier financial base to lessen the risk that they could collapse and cause a global meltdown.
The eight biggest banks will have to meet stricter measures for holding capital — money that provides a cushion against unexpected losses — under a rule that regulators are adopting Tuesday.
The Federal Reserve, the Federal Deposit Insurance Corp., and the Treasury’s Office of the Comptroller of the Currency voted separately to require those banks to raise their minimum ratio of capital to loans to 5 percent from the current 3 percent.
The banks’ deposit-holding subsidiaries will have to achieve a ratio of 6 percent. Because the deposits are insured by the government, the subsidiaries are subject to a stricter ratio requirement.
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The rule won’t take effect until 2018. It applies to eight US banks deemed so big and interconnected that each could threaten the global financial system: Goldman Sachs, Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, Morgan Stanley, Bank of New York Mellon, and State Street Bank.
The regulators also are proposing to increase the amount and quality of capital that all US banks must hold. Under the proposed rule that was opened to public comment, banks would need to maintain a level of high-quality capital equal to 5 percent of their loans and other assets.
That’s up from the current 4 percent requirement, which applies broadly to all capital reserves, not just to high-quality capital such as bank stock or retained earnings.