Rule Shift May Cause Banks to Limit Growth on Risky Assets
Bloomberg reported that U.S. regulators trying to force banks to maintain enough capital to survive a severe economic shock have signaled a shift in the tools they’re using to achieve that goal.
Bloomberg said banks have expected the overriding mandate from regulators to be a so-called leverage ratio. But now, under a change outlined by the Fed, the dominant yardstick for big banks may be the capital buffer they would need based on the riskiness of their assets.
Bloomberg notes that to meet the tougher rules, banks might choose to stop growing some of their businesses or even sell them off.
To read the entire Bloomberg report, click here.