USA: Will US banks soon have to prove more equity?

Zoom Image

Queue in front of the Silicon Valley Bank: 42 billion dollars withdrawn within five hours

Photo: BRITTANY HOSEA-SMALL / REUTERS

Recent bank failures could soon lead to stricter capital rules. According to a newspaper report, the U.S. authorities are considering imposing an average of 20 percent higher capital requirements on large banks. This is reported by the Wall Street Journal, citing insiders. So far, there has been no confirmation of these plans.

The planned tightening could be officially presented later this month, it said. The exact amount will depend on the size of the banking business. The rate is likely to increase most sharply for mega-banks with large trading businesses.

Fed was open to tightening

More on the subject

• Imminent upheavals on the financial markets: The default of the USA has been averted – or not? By Tim Bartz, Michael Brächer, Simon Hage and Roland Nelles

• Unrest on the financial markets: How the banking crisis is becoming a threat to the economy

• Saving the First Republic: JP Morgan Chase Takes Over Bankrupt BankBy Tim Bartz and Alexander Demling, San Francisco

The background to the now reported considerations is the recent upheavals in the American banking sector. In March, customers began to massively withdraw funds from regional banks Silicon Valley Bank (SVB) and Signature Bank. When California's SVB collapsed, customers had previously temporarily cleared $42 billion in funds from their accounts in just five hours.

The SVB collapse was the biggest collapse of a U.S. bank since the 2008 global financial crisis. In Switzerland, Credit Suisse had to be bailed out by an emergency sale to UBS. In some places, memories of the collapse of the US bank Lehman Brothers in 2008 have already been awakened.

According to the Wall Street Journal, there could also be a sharp increase in capital requirements for institutions such as Morgan Stanley and the credit card company American Express. These are heavily dependent on fee income, for example from investment banking. The companies have not yet commented on the report.

The move would not be entirely surprising: The U.S. Federal Reserve recently said it was considering stricter rules for financial institutions with assets of more than $100 billion. Fed Vice Chairman Michael Barr told a congressional committee in May that the central bank was carefully considering rule changes for larger regional banks.

apr/Reuters