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US Fed proposes rule to limit size of merged banks

The Federal Reserve building
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The Federal Reserve building

The U.S. Federal Reserve on Thursday proposed a rule to limit concentration in the financial sector, a requirement of the 2010 Dodd-Frank Act to make banks safer after the crisis.

The rule would prohibit a bank merger if the new company's liabilities exceed 10 percent of the aggregate consolidated liabilities of all financial companies, the central bank said in a press release.

Companies subject to the rule would be depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and non-bank financial companies designated ``as systemic'' by the Financial Stability Oversight Council (FSOC), a tag that carries greater regulation and Fed oversight.

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The public has until July 8 to comment on the rule, which the Fed then needs to finalize before it comes into effect.