The Federal Reserve Board of Governors said on Tuesday that it was accepting public comment on a rule that would require the eight biggest banks in the country to shore up their capital positions to prevent another potential worldwide financial meltdown.
If enacted, the proposal would affect Bank of America, BNY Mellon, Citigroup Inc., Goldman Sachs, JPMorgan Chase & Co., Morgan Stanley, State Street Corporation, and Wells Fargo. It would force these banks, the largest and most interconnected American financial institutions, to identify as a global systemically important banking organization (GSIB). The distinction would mean that the behemoth lenders would pay a capital surcharge to offset their more risky, short-term holding.
The Fed predicted such fees would equate to between 1% and 4.5% of a firm’s “total risk-weighted assets”–meaning charges would be higher on riskier investments.
Federal Reserve Chairwoman Janet L. Yellen said on Tuesday that the rules would prod banking giants “to reduce their systemic footprint and lessen the threat that their failure could pose to overall financial stability.”
Failure to comply with the rule would lead to “restrictions on capital distributions and discretionary bonus payments” at the banks
Despite reforms made in the wake of the 2008 financial crisis, some banks remain “too-big-to-fail” – so large that their collapse would threaten the entire financial system.
Today’s actions by the Federal Reserve Board of Governors were carried out under the authority of the Dodd-Frank Wall Street reform law passed in 2010.
The comment period will remain open until February 28, 2015.
