Regulators Propose Tightening Rules on Bank Borrowing

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The FDIC, OCC and the Fed jointly proposed new rules on bank borrowing that could hamper lending. The rules were unveiled at an open FDIC board meeting on Tuesday. Under the new rules, the eight biggest bank holding companies would have to fund a minimum of 5 percent of their assets with Tier 1 capital. That's 2 percent more than the minimum required under the international banking regulation known as Basel III. If banks don't hit the minimum by January 1, 2018, they can't pay dividends, buy back shares or pay discretionary bonuses.

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In addition, at the FDIC-insured operating bank, the company would have to have a leverage ratio of 6 percent to be considered "well-capitalized." If banks don't meet the 6 percent hurdle, they'll have to take "prompt corrective action" to raise their capital levels. Being well-capitalized makes it easier for banks to get their regulators' blessing of their capital plans.

The change takes aim at banks being too big to fail, said FDIC officials. The new rules are a significant increase in leverage for U.S. banks, they say. As of September of last year, these eight banks would have had to raise $63 billion of new capital to hit the 5 percent threshold at their holding companies, according to FDIC officials. They'd have to raise $89 billion to hit the 6 percent well-capitalized level at their FDIC-insured banks.

The big change in the amount of leverage is caused by including off balance sheet items in the calculation of banks' assets, which U.S. accounting does not require. The additions include 10 percent of non-cancellable commitments such as credit cards, and derivatives exposure, both of which can be huge numbers at any of these banks. Adding these off balance sheet items bumps up the capital requirements by 43 percent from traditional U.S. leverage measures, say FDIC officials.

The eight banks affected by the proposed rule would be Bank of America, Bank of NY Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo. Most of these already plan to have a 5 percent leverage ratio at their bank holding companies by the end of 2017, according to FDIC officials. Data from KBW shows that Wells Fargo and BofA are already there, while Citi, JPMorgan, Goldman, and State Street are already at 4.5 percent or above.

—By CNBC's Kayla Tausche and Margaret Popper. Follow them on Twitter at @kaylatausche and @popperm.