In a surprising move, US regulators are now studying a proposal to double the minimum capital requirements for its largest banks. Should this follow through, many of these financial institutions would be forced to halt the disbursement of its dividend payments.
The proposed policy would be to increase the capital lenders are required to retain, which would become 6% of the bank's total assets. This was confirmed by four people with knowledge of the discussions, which is twice the level required by global banking regulators.
Last year, US regulators proposed the implementation of the 3% international requirement, known as the simple leverage ratio. Under pressure from lawmakers, the Federal Reserve and the Federal Deposit Insurance Corp are studying options on increasing that base figure for some of the biggest banks in the country.
With the proposal, five of the six of the biggest banks in the United States, such as JP Morgan Chase & Co as well as Morgan Stanley would be covered under the 6% level. This was confirmed by investment bank Keefe, Bruyette and Woods Inc, making these banks would be constrained to retain more of their earnings and withold capital in order to comply with the new capital requirements.
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