Fed implements Basel III rules and warns of more

THE FEDERAL Reserve yesterday approved tough capital requirements for banks, implementing the Basel III set of rules and warning that stricter requirements are yet to come.

The Basel III regime, which requires banks to hold more funds in reserve against potentially risky assets, had been criticised by many of the US’s big banks, particularly by JP Morgan boss Jamie Dimon, who has described the rules as “anti-American”. None of Wall Street’s giants are believed to be in breach of the new regulations, while around 100 smaller banks will need to raise a total of $4.5bn (£3bn) by 2019.

However, Fed regulation chief Daniel Tarullo said that officials, led by chairman Ben Bernanke, were “very close” to new plans for even tougher capital rules, designed to end the supposed phenomenon of banks being too big to fail.

Wall Street has warned against stifling banks by introducing more regulation, saying a higher capital to risk ratio could inhibit a fragile economic recovery and disadvantage US lenders.

The Fed, which had been under pressure to implement Basel III – a set of requirements devised by a G20-appointed committee – said it expected other countries to follow it.

The implementation of the new rules around the world have repeatedly been delayed.