10.04.201821:41:00UTC+00Fed Proposes New Capital Rules for Large Banks

The U.S. Federal Reserve proposed new rules that could enable some big banks on Wall Street to lower the amount of capital they are required to hold as a safety net against a future economic downturn.

The proposal by the central bank is seen to pave some way for some big lenders to lower their capital levels in the future, however, the biggest firms on Wall Street are not seen to get such relief, the Fed said.

The plan is expected to lessen paperwork by banks and also make it easier for financial watchdogs to monitor the conditions of banks, according to Randal Quarles, the Fed Vice Chairman for Supervision. The Fed said that the proposed changes could potentially increase the amount of capital required for the 30 biggest banks known as global systemically important banks (GSIBs) to some degree.

The measures should moderately lower the amount of capital requirements for banks smaller than the GSIBs, according to the Fed. In a statement, the U.S. central bank said that no firm is anticipated to need to raise additional capital as a result of the said proposal.

The Federal Reserve said that banks and other stakeholders will have 60 days to comment on the proposal that is likely to be rolled out next year. It would be the first reform of capital standards put in place after the 2008 financial crisis. The new capital standard would be called the 'stress capital buffer' and would work hand-in-hand with the Fed's annual stress test, which evaluates the bank health.