This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Fed Holds Line on Basel III Rules

NEW YORK ( TheDeal) -- The Federal Reserve Board on Tuesday, July 2, approved a final rule implementing international regulatory capital reforms recommended by the Basel Committee on Banking Supervision as well as some changes required by the Dodd-Frank financial reform act.

The unanimously approved rules are meant to ensure that banks maintain capital positions sufficient to let them continue lending after unforeseen losses and through severe economic downturns. The rules contain substantial changes from a version proposed last summer, which were made to minimize the burden on smaller, less complex financial institutions.

The most burdensome rules will primarily affect JPMorgan Chase (JPM - Get Report), Citgroup (C - Get Report), Bank of America (BAC - Get Report), Wells Fargo (WFC - Get Report), Goldman Sachs (GS - Get Report), Morgan Stanley (MS - Get Report), Bank of New York Mellon (BNY), and State Street (STT). Many of the tougher rules also might apply to U.S. Bancorp (USB), Capital One Financial (COF), and PNC Bank (PNC). General Electric's (GE) GE Capital Corp. is also likely to be subjected to the rules when they are set for oversight of systemically important nonbank financial firms.

The Fed also made clear that the largest, most complex banks will in a few months also face additional capital rules, a higher leverage ratio, a long-term debt requirement and a surcharge for wholesale funding.

The rules make some important deviations from the Basel III guidelines, as do individual capital regimes that have been implemented on several European guidelines. The Basel Committee is expected to review the various national rules to gauge how closely they adhere to Basel III.

According to Federal Reserve members and agency staff, the final rules minimize the burden on smaller, less complex financial institutions, while establishing an integrated regulatory capital framework for institutions large and small. The rules are meant to address shortcomings in capital requirements, particularly for large international banking organizations that contributed to the 2008 financial crisis.

"This framework requires banking organizations to hold more and higher-quality capital, which acts as a financial cushion to absorb losses, while reducing the incentive for firms to take excessive risks," Fed Chairman Ben Bernanke said as he opened a meeting veiling the rules. "With these revisions to our capital rules, banking organizations will be better able to withstand periods of financial stress, thus contributing to the overall health of the U.S. economy."
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.80 -1.50%
C $46.74 -1.10%
GS $164.50 -1.40%
JPM $63.63 -0.75%
MS $27.24 -1.10%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs