The board of the Federal Reserve in Washington approved a rule requiring any bank holding company with more than $250bn in consolidated assets to limit its credit exposure to any particular counterparty to a maximum 25 per cent of its Tier 1 capital. Foreign banks operating in the US with more than $250bn in assets worldwide, and their US holding companies with $50bn or more in assets, would be subject to similar caps.
The rule, first outlined in 2016, was among the last pieces of the 2010 Dodd-Frank Act still awaiting implementation.
The biggest, most interconnected banks, known as GSIBs, will be subject to an additional restriction: a credit exposure of no more than 15 per cent of the Tier 1 capital of another GSIB.
The GSIBs will have to comply with the rule by January 2020, with all other banks complying by July 2020.
Randy Quarles, vice-chairman in charge of bank supervision, added that the Fed would consider “at a later date” whether to apply the restrictions to banks with between $100bn and $250bn in assets.
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