WASHINGTON, D.C. — Today, the Federal Reserve made a announcement that affects the way large banks handle their money. They’ve set some new rules to make sure big banks are prepared to handle tough times.
The new requirements are based on the results of the Federal Reserve’s 2023 supervisory stress test, which simulated a severe economic downturn.
The new capital requirements, the Federal Reserve said, are designed to ensure that large banks are sufficiently capitalized to absorb losses during a severe recession.
The requirements are as follows:
* A minimum common equity tier 1 (CET1) capital ratio of 4.5%
* A stress capital buffer (SCB) requirement of at least 2.5%
*A capital surcharge for global systemically important banks (G-SIBs) of at least 1.0%
The Federal Reserve said that the new capital requirements are “a necessary step to ensure that large banks have the financial resources they need to weather any economic storm.” The requirements are expected to have a significant impact on the financial industry, as large banks will need to raise additional capital in order to meet the new requirements.
The new capital requirements come at a time when the U.S. economy is facing a number of challenges, including high inflation and rising interest rates. The Federal Reserve said that the new requirements will help to “make the financial system more resilient to these challenges.”
What are the implications of the new capital requirements?
By requiring large banks to hold more capital, the Federal Reserve is making it more difficult for these banks to fail in the event of a severe economic downturn. Analysts say this will help to protect the financial system and the economy as a whole.
Large banks will need to raise additional capital in order to meet the new requirements. This could lead to higher costs for businesses and consumers.
What are the next steps?
The Federal Reserve will begin to monitor large banks to ensure that they are meeting the new capital requirements. The Federal Reserve said that it will continue to conduct supervisory stress tests.
