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Yellen: Big banks might need to hold more capital

April 15, 2014 News Extra

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WASHINGTON — Federal Reserve Chair Janet Yellen said this morning that the largest U.S. banks might need to hold additional capital to withstand financial stress.

Yellen told a banking conference here that current rules on how much capital banks must hold to protect against losses don’t address all threats. She said the Fed’s staff is considering what further measures might be needed.

She said some such measures would likely apply to only the largest and most complex banks. Yellen said the Fed would review the likely effects of imposing stricter rules on banks.

Banks and their advocates have warned that further tightening bank regulation would lead to reduced lending to businesses and financial institutions and could slow economic growth.

The Fed chair said bank regulators must focus on this area to try to prevent a recurrence of the 2008 financial crisis, which nearly toppled the banking system and led to a devastating recession.

Yellen spoke via video to a financial markets conference sponsored by the Fed’s Atlanta regional bank.

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