Fed to Support 3% Bank Surcharge

Is that 3%, or a 3% surcharge on top of ordinary capital reserves? It may even be still too much leverage for the brain trust known as Bankers:

“The Federal Reserve supports a proposal at the Basel Committee on Banking Supervision that calls for a maximum capital surcharge of three percentage points on the largest global banks, according to a person familiar with the discussions.

International central bankers and supervisors meeting in Basel, Switzerland, have decided that banks need to hold more capital to avoid future taxpayer-funded bailouts. Financial stock indexes fell in Europe and the U.S. yesterday as traders interpreted June 3 remarks by Fed Governor Daniel Tarullo as leaving the door open to surcharges of as much as seven percentage points.

Basel regulators agreed last year to raise the minimum common equity requirement for banks to 4.5 percent from 2 percent, with an added buffer of 2.5 percent for a total of 7 percent of assets weighted for risk. Basel members are also proposing that so-called global systemically important financial institutions, or global SIFIs, hold an additional capital buffer equivalent to as much as three percentage points, a stance Fed officials haven’t opposed, the person said.”

The weakness in the banks over the past 12 months may have been anticipating thse cap requirement changes . . .


Fed Said to Back Three Percentage Point Surcharge for Big Banks
Craig Torres and Ben Moshinsky
Bloomberg, June 7 2011

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