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Inside Washington (11/07/2011)
  • WASHINGTON (11/8/11)--Although an international regulatory board named 29 financial firms it regards as systemically important and thereby subject to a capital surcharge, the Financial Stability Board's (FSB) announcement last week failed to provide any detail on key issues.  For instance, the board did not identify the exact size of the surcharge, which will vary across institutions.  In fact, the board said that decision would not be made until later this month (American Banker Nov. 7). Previously regulators have noted that the identified firms would have to hold between 1% to 2.5% in extra capital---the precise amount would be determined based on the bank's size, risk exposure, and interconnectedness. Then on Friday, the Basel Committee on Banking Supervision said there would be four primary levels--or "capital buckets"--into which institutions would be placed: Some firms would be required to hold an additional 1% in capital, and others required to hold 1.5%, 2% or 2.5%. If a particular firm is identified as having increased its potential threat to the world economy, there is a special fifth bucket of 3.5% for them--but regulators noted that no firm yet has been identified as being required to hold that level of extra capital. The FSB said it examined 73 firms prior to naming the 29 listed as systemically important. The board intends to update that list each November and said it would continue to keep an eye on the pool of 73. The surcharge will not be fully phased in until November 2016. …
  • WASHINGTON (11/8/11)--The Federal Reserve Board, in conjunction with other U.S. banking agencies, will be working in the coming months to make changes to the proposed global liquidity coverage ratio under the Basel III accords. Fed Governor Daniel Tarullo said in a recent speech that he anticipates the regulators will want a "recalibration of certain deposit run-off and commitment draw-down rates," as well changes that would better emphasize liquidity characteristics assets in the buffer definition.  Tarullo said regulators are also studying how best to regulate during liquidity "stress events" so to best preserve financial stability. …


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