The Federal Reserve shocked bankers yesterday by approving a proposal that would force even the smallest lenders to comply with the elaborate international bank-capital standards known as Basel III, the Wall Street Journal reported today. The draft requirements would apply to all 7,307 U.S. banks, according to a proposal circulated by the Fed. Many bankers had expected regulators to exempt some small lenders from the new rules, which are aimed at shoring up the biggest global banks whose troubles fueled the financial crisis. While the core Basel III rules will apply to all banks, other aspects of the new regime single out the biggest, most complex banks for tougher treatment than their smaller peers. The Fed, for instance, has embraced slapping a handful of the biggest U.S. banks with a capital surcharge of between 1 and 2.5 percent. The Fed has yet to introduce the specific proposal. The tougher capital rules backed by the Fed Thursday will not take effect until 2019 but will come as an unwelcome surprise to small bankers struggling amid uneven economic growth, tough new rules limiting fees and technological and regulatory moves that have made larger banks more profitable.
