The U.S. federal banking agencies issued a statement supporting the Basel III accord reached on Sunday. The regulators said they “actively supported” the efforts of the G-10 Governors and Heads of Supervision (GHOS) and the Basel Committee on Banking Supervision to increase the quality, quantity and international consistency of capital, strengthen liquidity standards, discourage excessive leverage and risk taking, and reduce procyclicality in regulatory requirements.
The regulators, which include the Federal Reserve, the Treasury’s Office of the Comptroller of the Currency, and the FDIC, said Basel III sets the stage for key regulatory changes to strengthen the capital and liquidity of large multinational banks. Basel III will require banks to hold top-quality capital totaling 7% of their risk-bearing assets, up from just 2% under current rules. The rules may require banks to raise hundreds of billions of dollars of fresh capital over the next decade.
The regulators said the transition period, which phases in the new requirements through Jan. 1, 2019, gives institutions the opportunity to implement the standards gradually, thus alleviating the potential for short-term pressures on the cost and availability of credit to households and businesses.
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