Fed Proposes to Tighten Banks' Capital Levels
The Federal Reserve Board yesterday agreed to proposed stiffer capital levels for banks and bank holding companies.</br></br>Under the new rules, banks would have to show a minimum primary capital-to-assets ratio of 5.5 percent, up from 5 percent, and all bank holding companies would have to show a minimum total capital-to-assets ratio of 6 percent, up from</br></br>The Fed also proposed that the minimum primary capital ratio for smaller community state banks (assets under $1 billion) be reduced from 6 percent to 5.5 percent.</br></br>Fed officials said most big banks already had primary capital at the minimum levels. But bank holding companies will have to raise as much as $5.37 billion to reach the 6 percent total capital level, according to Fed estimates. Many holding companies have already raised the capital, so they will not need to go to external markets. Rather, it is a question of shifting the funds internally away from other subsidiaries and to their lead banks.</br></br>The FedÛªs agreement was reached in a unanimous vote by the FedÛªs board of governors after a similar move by the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency earlier this month.