On April 21, 2010, five US senators introduced a new bill. The name of the new proposed “Act” is “The SAFE Banking Act of 2010”.

The goal: to place a cap on the size of financial institutions and ensure that they retain sufficient resources to cover their losses.

More details can be found in the press release from Senator Sherrod Brown (D-OH). INterested in some background about the purpose? It is to stop threads!

“If we’re going to prevent big banks from putting our entire economy at risk, we need to place sensible size limits on our nation’s behemoth banks. We need to ensure that if banks gamble, they have the resources to cover their losses,” Brown said in the press release.

This is how it is scheduled to be done:

1. Imposing a 6% leverage limit for bank holding companies and certain non-bank financial institutions.

2. Reducing the maximum permitted amount of non-deposit liabilities to 2% of US gross domestic product (GDP) for banks and 3% of US GDP for non-bank institutions.

3. Placing a 10% cap on any bank holding company’s share of total insured deposits in the US.

Will keep you posted.

Reinhard von Hennigs
bdhlaw.net