Tarullo said that the Fed has been focused on the development of more robust capital standards in cooperation with the Basel Committee to include Basel 2.5 and Basel III reforms, which ultimately improve capital quality and require increased capital. Though banking regulators have yet to finalize Basel 2.5 reforms in the U.S., Tarullo said that the Fed will soon propose Basel III regulations to be implemented as well.
Additionally, Tarullo said the Basel Committee’s liquidity initiatives align with the Fed’s responsibilities laid out in the 2010 Dodd-Frank Act to implement more stringent liquidity standards on the nation’s largest banks and nonbank institutions.
Tarullo also said that the Fed is required under Dodd-Frank to implement enhanced prudential standards on those bank holding companies with more than $50 billion in assets and nonbank institutions deemed “systemically important financial institutions” by the Financial Stability Oversight Council.
“As we made clear in the proposal, however, the Federal Reserve expects to tailor the application of the enhanced standards to different companies individually or by category, taking into consideration each company’s capital structure, riskiness, complexity, financial activities, size and any other risk-related factors that the Federal Reserve deems appropriate,” Tarullo said, adding that the Fed is currently reviewing close to 100 comment letters received in regard to the measure.