The Fed is doing all they can to make sure that big banks don’t end up in the same predicament as when the market crashed back in 2008. One step in their prevention clause is to require big banks to ensure they have enough capital put aside.
Described as “capital surcharges”, the new proposal affects eight of the nation’s largest banks. They include: Citigroup, Bank of America, JPMorgan Chase, Goldman Sachs, Wells Fargo, Morgan Stanley, Bank of New York Mellon, and State Street. The amount of capital each of these institutions will have to put aside depends on two things: how risky the bank is deemed to be, in addition to a set of criteria put in place by the Feds.
The banks will have to comply and meet the restrictions of this rule by the beginning of 2019. And thus far, it doesn’t look like any of the eight establishments will have too much trouble meeting the standards. At the most, a bank would be required to have capital equivalent to 11.5% of its assets. In fact, almost all of the banks included in this proposal have already met the capital clause.
This is only one step that the Feds are taking in order to safely secure our banks to prevent any future financial crisis from destroying them. Janet L. Yellen, the Fed’s chairwoman, told the New York Times that this new rule “would encourage such firms to reduce their systemic footprint and lessen the threat that their failure could pose to overall financial stability.”
Source: CNN Money
