Fed Bolsters Tools to Avert Collapse of Big Firms – Bloomberg

The Federal Reserve sought to curb the risk of financial turmoil by strengthening the central bank’s tools for preventing the collapse of large firms and demanding stricter oversight by companies’ boards of directors.“The proposal would create an integrated set of requirements that seeks to meaningfully reduce the probability of failure of systemically important companies and minimize damage to the financial system and the broader economy in the event such a company fails,” the Fed said in the draft rules today.The central bank’s proposed standards, aimed at averting a recurrence of instability following the collapse of U.S. mortgage finance, target banks with assets totaling $50 billion or more and financial firms deemed “systemically important.” The Fed delayed releasing rules for supervision of foreign firms and for risk-based capital and leverage requirements.The proposed Fed rules require boards of directors to oversee and approve plans for limiting liquidity risk, while imposing enforcement triggers for firms deemed to have weaknesses in capital and risk management. The standards are mandated under the Dodd-Frank regulatory overhaul law passed in July 2010.Comments on the proposal are due by March 31, the Fed said today.Shares of U.S. lenders have trailed the broader market this year, with the 24-company KBW Bank Index BKX dropping 30 percent in 2011 through yesterday, compared with a 4.2 percent decline for the Standard & Poor’s 500 Index. The KBW Bank Index rose 4.2 percent at 2:40 p.m. in New York.

via Fed Bolsters Tools to Avert Collapse of Big Firms – Bloomberg.


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