Wall Street would have to come up with billions of dollars in additional capital in a proposed revamp of the Federal Reserve’s annual stress tests that could also scrap some provisions that lenders have criticized.
Bloomberg News reports that as the Fed has signaled for months, it is considering changes that would raise the minimum capital that the biggest banks need for a passing grade, Fed Governor Daniel Tarullo said Monday. But the Fed is also mulling concessions that Wall Street has sought, such as eliminating its assumption that lenders would continue to pay out the same level of dividends and buy back shares during periods of financial duress, he said.
The plan shows that even after a litany of new rules and capital demands imposed on the biggest banks in response to the financial crisis, regulators still aren’t satisfied that Wall Street is safe enough to endure another economic tsunami. Tarullo, the Fed’s point person on regulation, conceded that the proposal “would generally result in a significant increase in capital requirements” for the largest lenders.
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