Wall Street's biggest financial firms appear to have lost their battle to avoid the more stringent regulations being promoted by the likes of Bank of Canada governor Mark Carney.
Despite a concerted campaign by some top U.S. bank executives who branded the rules "anti-American," the U.S. Federal Reserve is poised to adopt the measures, which apply to global firms that are essentially "too big to fail," according to a report in the Wall Street Journal.
Citing unnamed sources, the newspaper said the Fed was embracing the latest elements of the "Basel III" framework, so-called because it represents the third round of standards put forward by the Basel Committee on Banking Supervision, an international group of bank regulators.
Under the Basel III accord, all banks would basically have to maintain a ratio of common equity to risk-weighted assets (like loans) of at least seven per cent, up from the Basel II standard of maintaining so-called Tier 1 capital at four per cent.
The latest set of rules would also require the world's biggest and most interconnected banks — the ones that pose the greatest risk to the global financial system — to maintain extra capital, called a surcharge, of between one and 2.5 per cent of their risk-weighted assets.
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