Fed proposes new, tougher rules for big banks

The Federal Reserve today announced the largest U.S. banks and financial companies should hold extra cash on their balance sheets to cushion themselves against financial crises. The proposal from the chief U.S. banking regulator will affect banks with over $50 billion in assets. There are even stricter rules for companies with over $500 billion in assets, such as JPMorgan Chase, Goldman Sachs Group and Citigroup. Fed officials didn’t give a timeline for when the rules will be implemented but said the final rules will be released only after the regulators will have a chance to incorporate comments from the public. The Fed is accepting comments for 90 days. The rules, part of new regulations proposed under the Dodd-Frank Act, call for banks with over $50 billion in assets to hold cash that is worth at least 5% of the value of their assets. Banks with over $500 billion in assets will also have to set aside 10% of the value of any lending or trading between each other. The Fed is also planning to issue another rule in the future, under which those larger institutions will have to pay a surcharge to their regulators based on the amount of risk in their balance sheets. The Fed also adopted rules for smaller banks with over $10 billion in assets, which will have to undergo stress tests conducted by their regulators to ensure that they are adequately prepared for an economic downturn.