Fed proposes rules to tame Wall Street risk-taking

Tue Dec 20, 2011 7:00pm EST
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By Dave Clarke

WASHINGTON (Reuters) - The Federal Reserve proposed new rules on Tuesday to restrain risk-taking by the largest U.S. banks as it tries to make the financial system more resilient against future crises.

The proposal, required by the 2010 Dodd-Frank financial oversight law, includes new capital and liquidity rules for the largest banks that would roll out in two phases and not likely go further than international standards.

The plan issued on Tuesday closely follows statements the Fed has made in recent weeks to calm Wall Street concerns that U.S. standards may be more aggressive than those of other nations, putting U.S. banks at a disadvantage.

Some analysts were hoping the Fed would provide more details in its proposal and that in many areas it simply echoed the law, leaving the specifics for later.

"This is pretty much a book report on the Dodd-Frank bill," said Paul Miller, a bank stock analyst at FBR Capital Markets.

The Fed said both the capital and liquidity requirements would be implemented in two phases.

The first phase would rely on policies already issued by the Fed, such as the capital stress test plan it released in November.

That stress test plan will require U.S. banks with more than $50 billion in assets to show they can meet a Tier 1 common risk-based capital ratio of 5 percent during a time of economic stress.   Continued...