Fed considers Basel bank capital proposal

WASHINGTON, June 7 Thu Jun 7, 2012 3:10pm EDT

WASHINGTON, June 7 (Reuters) - The Federal Reserve released a proposal to implement an international agreement on higher capital standards for banks, known as Basel III, that largely rejects pleas by the U.S. banking industry to soften parts of the new standards.

U.S. banks have pushed the Fed to allow them to count mortgage servicing rights and the unrealized gains and losses of certain securities more toward their capital requirements than allowed by Basel III but the U.S. central bank's draft rule would closely follow the international agreement.

The Fed board is scheduled to vote on whether to put the proposal out for public comment later on Thursday.

The Basel agreement is the cornerstone of efforts by international regulators following the 2007-2009 financial crisis to make sure the global banking system is more resilient.

The focus of the new standards is on how much banks should have to fund themselves with equity as opposed to debt so that an institution is able to withstand significant losses.

It is up to each country to write rules to implement the Basel agreement for its banks.

The accord, which is to be phased in from 2013 through 2019, will require banks to maintain top-quality capital equivalent to 7 percent of their risk-bearing assets. The Fed proposal adheres to this standard.

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