Make us your home page
Instagram

Regulators propose bailout prevention for 8 big banks

WASHINGTON — Federal regulators took a step Tuesday toward making eight of the largest U.S. banks meet a stricter measure of health to reduce the threat they pose to the financial system.

The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency proposed that those banks increase their ratio of equity to loans and other assets from 3 percent to 5 percent. In addition, the banks' deposit-holding subsidiaries would have to increase that ratio to 6 percent.

If adopted, the rule would take effect in 2018. It would apply to U.S. banks considered 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.

Hundreds of U.S. banks received federal bailouts during the financial crisis that struck in 2008 and triggered the worst economic downturn since the Great Depression. The list included the nation's largest financial firms, including all eight banks that will be subject to the rule proposed Tuesday.

Regulators said the rule was intended to minimize the need for future bank bailouts. It was mandated by Congress in the 2010 financial overhaul, which was drafted in response to the crisis.

The rule would help create "a stronger, more resilient industry, better able to withstand environments of stress in the future," FDIC chairman Martin Gruenberg said before the FDIC board voted 5-0 to propose the rule and put it out for public comment 90 days. A final vote will be taken some time after that, possibly with changes.

The rule was written jointly with the Fed and the Comptroller's Office, a Treasury Department agency.

The agencies estimate that the banks' parent companies would have needed to increase their capital a total of about $63 billion to meet the requirement, if it had been in place in September. The deposit-taking subsidiaries would have needed an additional $89 billion, according to estimates.

The rule was the first of four mentioned last week by Daniel Tarullo, a Fed governor, targeting the eight large banks.

Tarullo said the goal is to build buffers to withstand financial stress and avoid another crisis in which taxpayers would have to bail them out. Many critics worry the largest banks still represent a danger to the financial system.

The regulators' move follows action the Fed took last week to increase the capital all large banks must hold as a cushion against risk. The FDIC and the Comptroller's Office adopted that rule Tuesday. It would require the banks to maintain high-quality capital equal to 4.5 percent of their loans and other assets.

Regulators propose bailout prevention for 8 big banks 07/09/13 [Last modified: Tuesday, July 9, 2013 8:52pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa is 15th-most popular city to move to with U-Haul

    Markets

    TAMPA —Tampa is undoubtedly a destination point, at least according to U-Haul.

    Tampa is the No. 15 destination for people moving with U-Haul trucks. | Times file photo
  2. Florida's economy growing faster than other big states and far better than U.S. overall

    Business

    When it comes to economic growth, Florida's running alongside the leading states and well ahead of the United States as a whole.

  3. Westshore Marina District project takes shape with another acquisition

    Real Estate

    TAMPA — One of Tampa Bay's prime waterfront areas took another major step toward redevelopment Friday as WCI Communities bought 2.35 acres in Westshore Marina District.

    WCI Communities, Lennar's high-end subsidiary,has paid $2.5 million for 2.35 acres in the Westshore Marina District for 35 townhomes. WCI is under contract  to buy an additional 9.5 acres.
[BTI Partners]
  4. Posh Guy Harvey RV park to open in Tampa Bay with $250,000 cottages

    Business

    HOLIDAY — Love those Guy Harvey T-shirts with the soaring marlins? In the not too distant future, you might be able to kick back in your own Guy Harvey cottage in the first-ever Guy Harvey RV park.

    Renderings of the clubhouse and an RV cottage site of the planned Guy Harvey Outpost Club & Resort Tarpon Springs.
[Guy Harvey Outpost Collection]
  5. Port Tampa Bay secures $9 million grant to deepen Big Bend Channel

    Business

    Port Tampa Bay has secured a $9 million grant from the U.S. Army Corps of Engineers for the widening and deepening of the Big Bend Channel in southern Hillsborough County.