Federal Reserve

Fed proposal aims to stop 'too big to fail'

Big bank buffer requirement
Big bank buffer requirement

The Federal Reserve proposed Friday to require large banks to add another buffer, designed to reduce the "too big to fail" perception of big institutions.

Six of eight key U.S. banks would need to raise an additional $120 billion to meet the requirements, according to Fed officials. The rule aims to reduce the risk of the companies— including Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo — derailing markets or needing taxpayer money.

The Fed would expect some large banks to add long-term debt or take other actions to comply. Similar rules would also apply to U.S. subsidiaries of big foreign banks.

"By making the failure of even the largest banks more manageable, the proposed regulation will be another important step in solving the too-big-to-fail problem," said Fed Gov. Daniel Tarullo in a statement Friday.

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Six of eight banks assessed would not meet requirements, though officials did not specify which. The Fed's board voted in favor of the requirement Friday, and it will be opened to public comment before the central bank can finalize it.

It is among several rules that would aim to cut risk in the banking system.

CNBC's Mary Thompson and Reuters contributed to this report.