The Federal Reserve could release draft rules as soon as Tuesday governing how much extra capital the biggest U.S. banks must hold to fulfill requirements of the Dodd-Frank financial reform legislation.
The draft rules will cover a broad range of Dodd-Frank requirements, including the so-called capital surcharge for systemically important financial institutions (SIFIs), along with leverage limits, liquidity requirements, and credit-exposure limits.
The draft rules will not detail the actual surcharge levied on individual banks, however. Those levels await agreement on global rules being negotiated by bank regulators through the Basel banking committee. In addition, the charge will be based on asset levels in 2013. U.S. officials have pledged not to subject American institutions to more stringent requirements than those faced by global competitors.
The Basel committee has already decided that SIFIs will be forced to hold anywhere from 1 percent to 3 percent additional capital, depending on the size of the bank holding company. This is in addition to higher capital levels that all banks must hold along with higher quality capital.
In general, banks have until 2019 to reach these new capital levels. Some market observers pegged Monday's sell-off in financial shares to a news report that Fedofficials had embraced these new capital requirements. That decision was made and publicized many months ago, however, with Fed officials deeply involved in creating these new rules. So markets, in fact, were trading on old news.
As has been widely reported, the Basel committed designated 29 banks as SIFIs, eight in the U.S.
CNBC has learned that the new rules are likely not to require additional capital charges for those banks that are large (with assets greater than $50 billion) but that have not been designated as SIFIs. These banks are likely to see their capital levels regulated more through the stress-test process, which will govern their share buybacks and dividend levels.
While there were indications the draft rules could come as soon as today, it's possible they won't be released until later this week.