Bank holding companies would have to maintain the same capital levels as their federally insured banking units under a proposal issued by U.S. bank regulators Tuesday.
The move by the Federal Deposit Insurance Corp. was required by a portion of this year's Dodd-Frank financial overhaul law that aimed to bolster the finances of bank holding companies after weakness was seen during the 2007-2009 financial crisis.
Bank holding companies sometimes relied on their insured depositary institutions as a source of capital strength when regulators say the opposite should have been the case.
The FDIC voted to put the proposal out for 60 days of comment, seeking feedback on how it should be implemented.
"This should have been in place years ago. I'm not saying it would have stopped the crisis, but it would have helped to hold bank holding companies to the same standards," said Paul Miller, bank analyst at FBR Capital Markets.
Details were scarce in Tuesday's proposal for a permanent capital floor but it would replace the current system where there are shifting minimum capital levels.
These rules would also apply to any non-bank institutions that regulators deem important to the financial system and therefore subject to supervision by the Federal Reserve.
U.S. banks, pushed in part by industry regulators, have already built large reserve pools of capital in the wake of the financial crisis.
The largest American lenders are preparing for new international capital rules, called Basel III, which will be phased in over the next several years, requiring banks to maintain an 8 percent core capital ratio.
A question surrounding the FDIC proposal is how it will mesh with Basel III, which was endorsed in November by leaders from the Group of 20 developed and emerging nations.
The details of that agreement are still being hammered out and U.S. regulators have yet to consider how to implement it.
Miller said the FDIC rule will affect smaller banks, such as regional and community banks, more than bigger players.
"The big banks have access to the capital markets, whereas for smaller community banks, the only way to capitalize the bank is through the holding company. They're going to be more constrained," he said.
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