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IPFS News Link • Federal Reserve

Fed Boosts Capital Rules for Banks, Hitting Stocks

•, Reuters

 The move, which came just before the market close, pushed financial stocks lower, including Bank of America [BAC 7.42 -0.22 (-2.88%)  ] and Morgan Stanley [MS 13.41 -0.53 (-3.8%)  ] .

 U.S. banks had pushed the Fed to allow them to more heavily count mortgage servicing rights and the unrealized gains and losses of certain securities toward their capital requirements than allowed by Basel III, but the U.S. central bank's draft rule closely follows the international agreement.

 The Federal Deposit Insurance Corp and the Comptroller of the Currency are expected to approve the proposal soon as well.

 The Basel agreement is the cornerstone of efforts by international regulators following the 2007-2009 financial crisis to make sure the global banking system is more resilient.

 The new standards would force banks to rely more on equity than debt to fund themselves, so that they are able to better withstand significant losses.

 It is up to each country to write rules to implement the Basel agreement for its banks.