Tuesday, 2 July 2013

Basel III Capital Rules, U.S. Banks' Cash Assets

Market Watch reports,
The Federal Reserve on Tuesday was set to vote to approve a proposal to implement a global agreement on bank capital buffers known as Basel III, including a measure that would establish limits on a big bank's capital distributions and bonus payments if the institution doesn't have certain common equity buffers in place. The rules, implemented in response to the financial crisis of 2008, are a critical step to ensure large institutions are sufficiently cushioned against future financial shocks. Roughly 100 banks will have to raise roughly $4.5 billion in capital by 2019, according to a Fed estimate. However, regulators decided to provide big banks with relief from a provision that would have required large institutions to give higher risk weighting to certain types of subprime and other mortgages. "With these revisions to our capital rules, banking organizations will be better able to withstand periods of financial stress, thus contributing to the overall health of the U.S. economy," said Fed chairman Ben Bernanke in a statement.
It appears U.S. banks have (at least partly) prepared for this and have become more "able to withstand periods of financial stress", certainly when considering banks' surge in Cash Assets since the end of 2008.

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