Trading in Bank Stocks Suggest, For The Past Few Weeks, an Increase in Capital Requirements was Expected

Bloomberg News“Daniel Tarullo, governor of the U.S. Federal Reserve speaks during a Senate Banking hearing earlier this year.

Large U.S. financial institutions might be forced to sharply increase their capital cushions as part of a plan discussed by the Federal Reserve to help prevent another financial crisis.

In a speech on Friday, Federal Reserve governor Daniel Tarullo suggested institutions could be ordered to hold capital ranging from 8% to 14% of assets, adjusted for the amount of risk they pose.

No decision has been made, but in some extreme cases that would be twice as high as the 7% agreed to last year by global policy makers in Basel, Switzerland.

“The regulatory structure…should discourage systemically consequential growth or mergers unless the benefits to society are clearly significant,” Mr. Tarullo said at the Peterson Institute for International Economics. “No one wants another TARP,” he said, referring to the Troubled Asset Relief Program, the $700 billion government bailout that became necessary as financial institutions teetered on the brink of insolvency in 2008.”