The Federal Reserve is releasing new capital and liquidity rules this week that target the nation’s biggest banks that hold more than $50 billion in assets.
The new standards also focus on liquidity, risk management structure, credit reporting concentration limits, stress tests, contingent capital and short term debt limits, BusinessWeek.com reports.
Implementing heightened standards was a task handed to the Fed by last year’s Dodd-Frank Act. The goal is to create disincentives for banks to expand and become more complex.
Large banks will also be forced to comply with new international capital standards agreed to by the Basel Committee on Bank Supervision earlier this year, which require major global banks to apply a systemic risk surcharge of one percent point to 2.5 percentage points.
Ohio Rep. Marcy Kaptur (D) recently introduced The Return to Prudent Banking Act aimed at strengthening the financial system by reinstating the Glass-Steagall Act.
Glass-Steagall separated commercial and investment banking for decades and limited investment banks to leveraging only their own funds. It was repealed over a decade ago, which, according to Kaptur, “exposed the [U.S. economy] to an intolerable level of risk,” Kaptur wrote in a Dear Colleague letter requesting support for her bill earlier this year.
The bill is currently pending in the House Committee on Financial Services but has slowly been building bipartisan support and currently has 57 co-sponsors.