By Dow Jones Business News, September 24, 2013, 03:05:00 PM EDT
WASHINGTON--The largest U.S. banks will have to start incorporating newly minted capital rules into their annual "
stress tests" this year even though the requirements have yet to be formally phased in, the Federal Reserve said
Banks with at least $50 billion in total assets would have to work the capital rules finalized by regulators earlier
this year into the capital-planning projections and stress tests they are required to undertake by the government. A
second tier of banks, those with between $10 billion and $50 billion in total assets, would have an extra year to start
incorporating the capital rules.
While the Fed said it is not changing its existing 5% minimum-capital target for banks, it does want the largest firms
to account for the new, higher-capital standards when they assess their ability to withstand a variety of economic
The new capital rules, known globally as Basel III, include a number of changes for banks of all sizes, including
higher capital and leverage standards aimed at strengthening banks' ability to withstand times of distress. The rules,
which U.S. regulators finalized in July, are slated to be phased in over the next two years based on the size of an
individual bank. For the biggest banks, the phase in of the new rules overlaps with the next stress-test cycle.
Requiring banks to account for higher capital requirements in their annual stress tests could make it difficult for
some firms eager to reward shareholders with buybacks and dividends, since the Fed uses the process to determine whether
banks will be able to move ahead with their capital plans. The Fed in previous years has rejected some banks' capital
plans, while forcing other firms to resubmit their calculations.
Write to Michael R. Crittenden at Michael.Crittenden@wsj.com
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