WASHINGTON Feb 5 A top U.S. bank regulator plans to tell lawmakers on Thursday that final leverage rules for U.S. banks will incorporate recent revisions to a global capital standard, which likely means tougher requirements for the institutions.
U.S. regulators proposed rules in July to limit the extent to which banks may fund their activities through debt, part of the Basel III global agreement to boost banks' capital levels.
In January, the international group revised the way it requires banks to calculate whether they are meeting the leverage requirements. That latest version is seen as somewhat tougher on banks than the method U.S. regulators initially proposed for firms operating in the country.
Federal Reserve Governor Daniel Tarullo plans to tell a U.S. Senate Banking Committee hearing that the final U.S. rules would incorporate the changes agreed on by the Basel group.
"These changes would strengthen the ratio in a number of ways, including by introducing a much stricter treatment of credit derivatives," he said in prepared remarks obtained by Reuters.
Global regulators reached the Basel accord to make banks safer after the 2007-2009 financial crisis. Capital rules force banks to fund a minimum amount of business through equity, rather than debt.
Leverage ratios are calculated as a percentage of total assets, unlike some capital ratios that consider the riskiness of bank assets.
U.S. regulators have proposed a 6 percent leverage ratio for the biggest banks, twice as much as called for under the global agreement. They also differed in how they required banks to calculate their leverage ratios.
The Basel committee tweaked its rules in January for calculating the leverage ratio. European banks saw that as easing some of the requirements on them.
But that revised calculation method is tougher than the U.S. proposal in its approach to credit derivatives, Comptroller of the Currency Thomas Curry plans to tell the Senate committee on Thursday.
It also differs from the U.S. version in its treatment of certain off-balance sheet commitments, Curry said in prepared remarks posted on the committee's website.
"Our preliminary analysis suggests that, in the aggregate, the final Basel standards will generate a larger measure of exposure - and will therefore be more stringent - than the current and proposed U.S. standards," Curry said.
Bank groups have speculated about whether U.S. officials would tweak their proposal to match the Basel rules. Tarullo said the U.S. final rules would "incorporate" the international revisions, but did not elaborate.