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Small Banks Cheer As US Authorities Tough Rules for Wall Street
After a vote, the Federal Reserve Bank decided in favor of the US version of global Basel III capital rules. Under this rule, banks were required to have more equity capital as funds for their business, as this was expected to make them more robust.
The new rules would require around three times of top-quality capital. This was to reduce risk as well as protect form costly bailouts. However, four more new rules,which would be written next, was expected to address issues on the risk posed to the financial system by the eight largest US banks.
On the other hand, smaller banks were expected to be shielded from the harshest impacts of the Basell III-adopted rule. "The headline here is (that) community banks are getting significant relief," said an associate at Cleary Gottlieb Steen & Hamilton, Allison Breault.
She further stated that "the largest banking organizations are going to be subject to even stricter requirements than they had originally anticipated."
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