Magazine article American Banker

Reg-Lite for Small Banks, Higher Capital for Big Banks: Minn. Fed TBTF Plan

Magazine article American Banker

Reg-Lite for Small Banks, Higher Capital for Big Banks: Minn. Fed TBTF Plan

Article excerpt

Byline: John Heltman

WASHINGTON -- The Federal Reserve Bank of Minneapolis on Wednesday called for substantially higher capital for the largest banks while small institutions face a simpler, easier regulatory compliance scheme under a final plan designed to keep banks from being "too big to fail."

The final proposal largely mirrors the proposed plan that was published in November 2016. Both plans call for a 23.5% risk-weighted capital requirement for banks with more than $250 billion in assets; a certification process for the largest banks to be declared either capable of failure or subject to even higher capital standards; a 23.5% capital requirement for shadow banks with more than $50 billion in assets; and far fewer regulations on community banks.

Minneapolis Fed President Neel Kashkari said now is the time to pursue the goal of strengthening the banking system and preventing a downturn from having the same devastating effect as the 2008 financial crisis.

"With today's strong economy, now is the perfect time to act to strengthen our financial system," Kashkari said. "We must not wait, and we must not go backwards. If we wait until the next crisis to implement these reforms, it will be too late."

The Minneapolis Fed held three public symposiums in Minneapolis and Washington over the course of 2016 and a request for public comments on the proposal after it was published. The banking industry has been unsurprisingly skeptical of the process, with few large banks sending representatives. …

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