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US banks could be hit by tougher capital rules

Eight of the largest banks in the US could face much tougher financial ratios required under the international standards set by the Basel III global agreement as the nation's banking regulators consider breaking from the arrangement.

The new proposals are designed to protect taxpayers from footing the bill should there be another financial crisis.

Under the scheme, Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo would each have to hold capital equal to at least five per cent of their total assets.

In addition, their federally insured bank subsidiaries would need to hold capital equal to at least six per cent of assets.

The Basel III agreement states banks will need to meet only a three per cent leverage and under these new proposals mooted by the US government, other institutions in the country will stick to the international arrangement.

By Tony Aynsley