Senate Takes a Swipe at Too Big to Fail Banks

U.S. Senate Republicans and Democrats are drafting a proposal that is designed to curb the size of some of the largest banks in the United States. This proposal would require some of the banks, including JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), to hold more in capital than required by the Basel III standards.

The draft of legislation as it is would require U.S. regulators to move from the Basel III standards to requirements where all banks would have to hold 10 percent of their capital plus an extra 5 percent for any bank who holds more than any $400 billion in assets.

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This legislature is due at least in part to the demand for increased regulation of banks. Currently, the Basel III regulations state that a bank has to hold at least 7 percent of Tier one capital against their risk-weighted assets. Some of the largest banks face as much as a 2.5 percent surcharge.