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Big U.S. banks may need to increase their buffers to absorb setbacks.
That reports The business newspaper The Wall Street is based on anonymous sources. After the collapse of many smaller regional banks earlier this year, the capital requirements of major banks will increase by an average of 20 percent due to the upcoming tighter regulations, sources said.
The new rules could be announced as early as this month, the newspaper said. Each bank’s specific buffer increase depends on the bank’s operations. The riskier they are, the more money a bank should keep separate.
After the 2008 financial crisis, bank capital requirements increased sharply worldwide to prevent a repeat. However, in recent years, these rules have been relaxed for smaller banks in the US under former President Donald Trump.
In March, there was a lot of unrest in the US banking industry after the collapse of Silicon Valley Bank and Signature Bank. Because customers in these banks withdrew huge amounts of money from their accounts in a few days. The First Republic faced the same problem and collapsed. First Republic was later bought by the largest American bank, JP Morgan Chase. Thus, the demand for stricter controls increased again.
Michael Barr, the Federal Reserve’s vice chairman of oversight, said earlier that US officials would review bank capital requirements to bring them in line with Basel III requirements, the international standards for bank capital requirements. Barr also indicated that he favors stricter rules for major US banks such as Bank of America, JPMorgan Chase, Citigroup and Wells Fargo.
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