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July 9, 2013

U.S. Banks Face Two Ratios as FDIC Sets Capital Vote

Capital standards at the biggest U.S. lenders would rise to 5 percent of assets for parent companies and 6 percent for their banking units under a plan proposed today by federal regulators.

The Office of the Comptroller of the Currency proposed a leverage ratio that’s 2 percentage points more than the 3 percent international minimum for holding companies, the agency said in a statement. Capital at U.S.-backed deposit and lending units must be twice the global standard at 6 percent, according to the OCC. The Federal Deposit Insurance Corp. is set to vote on the proposal later today.

The U.S. plan goes beyond rules approved in 2010 by the 27-nation Basel Committee on Banking Supervision to prevent a repeat of the 2008 crisis that almost destroyed the financial system. The changes would make lenders fund more assets with capital that can absorb losses instead of with borrowed money. Bankers say this could force asset sales and pinch profit.

“’A 3 percent minimum supplementary leverage ratio would not have appreciably mitigated the growth in leverage among these organizations in the years preceding the recent crisis,’ said FDIC Chairman Martin Gruenberg in a statement.”

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Read full Bloomberg article here

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