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The traditional way for a bank to hold capital is through retained earnings or financial holdings that they can turn into cash quickly.
One upshot of this is that banks may have to hold capital well above regulatory minimums to be considered properly capitalized in the Fed's eyes.
The so-called Basel III banking rules approved by the G-20 last year would require banks to hold capital reserves equal to at least 3 percent of all their holdings, regardless of the perceived risk.
First, other financial institutions — not just traditional banks — must hold capital, too.
Nobody denies the importance of requiring banks to hold capital as a protection against losses.
To operate internationally, banks must hold capital worth at least 8percentt of their assets.
Under Brown-Vitter, the bank would have an 8 percent capital requirement, requiring it to hold capital of $8 billion.
The Fed could also make banks that run money market funds hold capital to protect against losses in the funds.
The banks selling ABS would no longer have to hold capital against these loans, freeing them to make new ones.
The council could designate the stable net asset value as systemic and require that the funds hold capital.
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This frees originators from being required to hold capital against debt.
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