Fed Proposes New Capital Rules for Banks.

[elleng]

The Federal Reserve on Tuesday proposed rules that would require the largest American banks to hold more capital — and to keep it more easily accessible — to protect against another financial crisis.

But the Fed, the nation’s chief banking regulator, added that the final capital rules were unlikely to be more stringent than international limits that were still under development.

That is a small victory for banks who warned that they would be severely disadvantaged if capital requirements here were stricter than those governing overseas banks. Bank representatives are still wary about details that remain to be worked out, however, including how much of an extra capital cushion would be imposed on the biggest of the big institutions like Bank of America, JPMorgan Chase and Citigroup.

In a 173-page proposal that tied to the Dodd-Frank regulatory law passed last year, the Fed also proposed formal limits on the amount of credit exposure that a bank holding company can have to any major borrower, be it another bank or corporation.

http://www.nytimes.com/2011/12/21/business/fed-proposes-new-capital-rules-for-banks.html?hp

[Ruby the Liberal]

1. This part of Dodd/Frank always confused me

Where does this fit with Basel III?

[Po_d Mainiac]

2. plenty of room for the banksters to get around D/F

Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets.

But unless assets (so-called) are marked to market (and not to some mythical face value) many non-banksters wood argue the whole exercise is window dressing. Dexia was supposed to have passed a stress test with flying colors.

Soveriegn debt is factored as money good, until like Greek bonds, they ain't.

[Ruby the Liberal]

4. But even Mark to Market is a myth.

I know my former employer was selling off assets and divisions like mad this summer because of BIII capital requirements. I guess I am not grasping what D/F is going to do any differently come January.

[Po_d Mainiac]

7. Exactly!

If falls way short of any true bankster reforms. Oh sure the Wall Street shit heads will do the ceremonial weeping in front of the cameras, but other than putting a limit on debit card fees and supposedly halt trading, (that by all rights was illegal anyway) it will be business as usual.

The banksters own enough votes to kill the consumer protections, by not funding the agency, and NO one expects the FED to actually enforce.

[SixthSense]

3. Look at what Dodd is doing today

and it won't be too terribly difficult to figure out how effective that "reform" is going to be

Chris Dodd = Friend of Angelo

beware

[sendero]

6. Exactly..

... until we get the equivalent of Glass-Stegalll and make banks be BANKS and not some heads-we-win tails-you-lose CASINO, none of these silly little rules make any difference AT ALL. They can always be worked around.

We'll get G-S when the system collapses well and truly, an event that is probably less than a decade away.

[Ghost Dog]

5. Basel to Curb Bank-Capital Boosts on Derivatives Writedowns

Global regulators are seeking to curb banks’ use of an accounting rule allowing lenders to boost their profits and capital by writing down the value of their own debt and derivatives when market prices fall.

The rule, known as debt or debit-valuation adjustment, says that banks can book financial gains when the value of their own bonds and derivatives falls, under the theory that a profit would be realized if the liabilities were repurchased at a discount...

... The Basel committee is seeking to avoid “an increase in a bank’s capital when its own creditworthiness deteriorates, which would otherwise undermine the quality of capital and the protection it provides to depositors and senior creditors,” the group said.

Lenders including HSBC Holdings Plc (HSBA), Citigroup and BNP Paribas (BNP) SA have warned that plans by the Basel committee to impose additional capital surcharges on systemically important lenders could force them to cut loans to businesses and support to international trade.

/... http://www.bloomberg.com/news/2011-12-21/basel-to-curb-banks-boosting-capital-with-derivatives-writedowns.html