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Federal Reserve rule addresses inter-bank lending

Joe Mont | March 7, 2016

The Federal Reserve Board has proposed a rule intended to address the risk associated with excessive credit exposures of large banking organizations to a single counterparty. During the financial crisis, large credit exposures, particularly between financial institutions, were shown to spread financial distress and undermine financial stability.

The proposal would apply single-counterparty credit limits to bank holding companies with total consolidated assets of $50 billion or more. The proposed limits are tailored to increase in stringency as the systemic footprint of a firm increases:

A global systemically important bank (G-SIB) would be restricted to a credit exposure of no more than 15 percent of...

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