US banks to hold more capital

12 June 2012

Banks in the US will be required to hold greater levels of capital to make sure they can cope with unforeseen economic crises in the future, it has emerged.

Policymakers at the Federal Reserve (Fed) have voted unanimously to impose new rules on American financiers, which means that lenders will need to hold up to seven per cent of their asset base in capital reserves from 2019.

This represents a significantly higher figure than the current legal minimum of two per cent and reflects the fact the Fed is eager to make sure banks do not need to be bailed out should any repeat of the financial crisis occur.

Ben Bernanke, chairman of the Fed, said this move is important as capital acts as a "financial cushion" that both limits the impact of a company's losses and reduces the incentive for them to take unnecessary risks.

Fed governor Daniel Tarullo added: "A bank with a strong capital position can absorb losses from unexpected sources."

By Claire Archer

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