WASHINGTON Feb 21 U.S. regulators on Friday
said eight big U.S. banks could use their own, tailored risk
models to determine their capital requirements in the future.
Banks must rely less on debt and more on capital raised from
shareholders as part of a global agreement to bolster the
financial system after the 2007-2009 crisis.
That agreement, known as Basel III, calls for banks and
their regulators to consider the riskiness of firms' assets when
they determine their capital requirements.
Under rules being implemented by the Federal Reserve and the
Office of the Comptroller of the Currency, the biggest U.S.
banks will use their own models for judging their riskiness.
These are seen as more sophisticated than across-the-board
Big banks must meet certain standards for managing and
measuring risk for four consecutive quarters before they can use
the internal models to determine their capital needs.
The agencies said eight holding companies passed that test.
They were Bank of New York Mellon Corp, Citigroup Inc
, the Goldman Sachs Group, JPMorgan Chase & Co
, Morgan Stanley, Northern Trust Corp,
State Street Corp and US Bancorp.
They will begin reporting their risk-based capital ratios
using these models during the second quarter of 2014.
Some reform advocates have said letting banks use internal
models gives them too much leeway to avoid tougher capital
requirements. Under U.S. rules, big banks must meet the required
ratios under the general models too, the agencies said.
The Fed also said the general models will be used again for
the next round of stress tests, which weigh banks' health, to
give the eight banks and regulators more time to adjust.