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July 02, 2013

Fed Imposes Tougher Bank Finance Rules

by VOA News

The U.S. central bank has imposed stiffer operating rules for the country's banks in an effort to prevent them from failing and threatening American economic prospects.
 
The Federal Reserve Tuesday set the new rules, requiring banks to hold more money in reserve against bad debts. The rules exceed the guidelines set in recent years by the world's financial leaders in the aftermath of the worldwide economic downturn in 2008 that was caused in part by risky lending.
 
The central bank, which oversees monetary policy in the world's largest economy, said the new rules would permit banks to have enough cash on hand to make more loans to businesses and consumers "even after unforeseen losses and during severe economic downturns."
 
One bank official, Daniel Tarullo, called the adoption of the rules "a milestone in our post-crisis efforts to make the financial system safer."
 
The Federal Reserve says that many banks are already in compliance with the new rules, but that about 100 banks will have to raise a combined $4.5 billion by 2019 to comply.
 
In the coming months, the Fed plans to propose further restrictions on the eight largest U.S. financial institutions, the ones it considers "systemically important" to the world economy.