U.S. agencies trying to ensure the financial system is strong enough to withstand another crisis have settled on one of the last pieces of their regulatory apparatus to limit the size of bank debt, Bloomberg News reported today. The decision on how to count bank assets used in an institution’s leverage ratio will be in line with an international standard. That would be welcomed by the eight largest U.S. banks since they could more easily meet new capital rules than they could under an earlier plan. Banking overseers have made it clear since the 2008 credit crunch that they would require firms including JPMorgan Chase & Co. and Bank of America Corp. to hold more capital relative to what they borrow to make investments. U.S. agencies have already proposed a leverage ratio of 5 percent for bank holding companies and 6 percent for their banking units — higher than the 3 percent set by an international group of regulators. What has been less clear is how to count certain complex transactions as assets in calculating that ratio. U.S. regulators have now agreed to take the approach adopted in January by the Basel Committee on Banking Supervision.
