Regulators Propose Higher Capital Requirements for Largest Banks

Federal regulators announced a proposal Tuesday to double the standard Basel III leverage ratio for the ""largest, most systemically significant"" banks.

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In separate statements Tuesday, the ""Office of the Comptroller of the Currency"":http://www.occ.gov/ (OCC), ""FDIC"":http://www.fdic.gov/, and the ""Federal Reserve Board"":http://www.federalreserve.gov/ (FRB) announced a proposed rule that would require certain banks to meet a 6 percent supplementary leverage ratio to be considered ""well capitalized.""

The proposal would also require covered bank holding companies to maintain a tier 1 capital leverage buffer of at least 2 percent above the minimum supplementary leverage ratio requirement of 3 percent, for a total of 5 percent, the regulators stated.

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Currently, the proposed rule would apply to eight banks. If adopted, the rule would take effect on January 1, 2018.

The OCC also announced it gave approval for a final rule on regulatory capital that is expected to offer relief to community banks. The FDIC also revealed it approved an interim final rule (IFR) that is identical to the final rule from the FRB last week and the rule just issued by the OCC.

""I'm pleased that the new capital rule not only improves the quantity and quality of capital, but does so in a way that minimizes the burden on community banks and federal savings associations,"" said Comptroller of the Currency Thomas J. Curry.

The OCC stated one key change to the final rule from the June 12, 2012 proposal is the final rule does not change the current treatment of residential mortgage exposures.

""This was an important issue for many community banking organizations seeking to continue to meet the credit needs of their customers,"" the OCC stated.

Jeremiah Norton, FDIC director, expressed his support for the IFR, but acknowledged the rule ""contains a number of provisions that fail to address known and potential risks to the banking system.""

For one, he stated, the ""U.S. housing market was at the center of the financial crisis--yet today we are not modernizing the risk-weights on banks' mortgage loans.""