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Risk Management: Federal Reserve to Vote on Basel III

The Federal Reserve will vote June 7 on the Basel III standards, which require

On June 7, the Federal Reserve is expected to vote on rules that will increase capital requirements for banks, known as the Basel III rules.

Following the onset of the global financial crisis, regulators insisted on a new set of guidelines that would insulate financial institutions from any such disasters in the future. Between 2013 and 2019, major banks will be required to increase their capital reserves to 7 percent of the total value of their risk-bearing assets, reported Reuters. Certain global banks will be required to have an additional cushion of 2.5 percent on top of that.

Although many of the banks that will be impacted by the new regulations - including JPMorgan Chase, which recently lost more than $2 billion in risky investments - say their ability to lend will be hampered by the rules, regulators argue instead that the world will benefit from a more stable market. 

A recent study from JPMorgan Chase, which will be affected more than most institutions under the rules, suggested that clearing costs under the new rules would be significantly greater than regulators had originally calculated, reported the Financial News.