Fed 'to embrace global banking rules'

Federal Reserve © AFP/File Karen Bleier

WASHINGTON (AFP) – The US Federal Reserve is expected to embrace a new global framework that requires giant financial institutions to hold extra capital, The Wall Street Journal reported Monday.

Citing unnamed people familiar with the situation, the newspaper said the Fed’s decision to accept the rules laid out by regulators in Basel, Switzerland, could come before Christmas.

It is a defeat for big US banks that argued the guidelines needn’t be so strict, the report said. They contended the Basel approach could prompt them to reduce lending and hurt the economy.

Internal estimates from the Basel Committee on Banking Supervision showed JP Morgan Chase & Co would have to hold 2.5 percent of extra capital as a percentage of risk-weighted assets, on top of the 7-percent base that all institutions will be required to hold, The Journal noted.

Many of JP Morgan’s US competitors will likely be required to maintain extra cushions of between one percent and two percent, the paper said.

But these numbers are not final, and the Basel surcharge will not phase in until 2016, the report pointed out.