Fed aims to make big banks resilient

The Federal Reserve, fearing complacency six years after the financial crisis, moved Tuesday to preserve the efforts that have strengthened large banks.

The Fed proposed a rule that would increase capital requirements for the nation’s eight largest banks, including JPMorgan Chase and Goldman Sachs. By increasing the requirements, the Fed aims to make large banks more resilient to shocks. A bank with higher capital depends less on borrowed money, which may cease to be available in times of stress.

The Fed’s push to increase capital may also reduce the chances that a large bank’s problems may weigh on the wider economy. Some economists have said that the size of some banks has made them “too big to fail.”

Janet Yellen, the Fed’s chairwoman, said Tuesday that the proposed rule might persuade banks to shrink. The rule, she said in a statement, “would encourage such firms to reduce their systemic footprint and lessen the threat that their failure could pose to overall financial stability.”

Most of the affected banks have raised billions of dollars of new capital since the crisis, so they will most likely not find the proposed rule onerous to comply with.

Fed officials estimated that nearly all of the eight banks would already meet the new requirements outlined Tuesday. They added during phone a call with reporters that the eight banks would have to raise a total of $21 billion in additional capital but declined to provide specific figures for individual banks. JPMorgan, however, may account for most or all of that sum.

At a public Federal Reserve Board meeting Tuesday, Stanley Fischer, the central bank’s vice chairman, made comments that implied that JPMorgan would be hardest hit by the regulation.

“The whole shortfall looks to be tied to JPMorgan,” said Jason Goldberg, a bank analyst at Barclays.