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World's Major Banks Endorse New Rules

BASEL, Switzerland (AP) - The world's major central banks have endorsed new rules that will require banks to hold more capital in reserve than they currently do.

The rules are designed to strengthen bank finances and rein in excessive risk-taking.

Banks will have to hold a mandatory reserve of 4.5 percent of their balance sheet and an emergency reserve of 2.5 percent.

The combined total will rise to 8.5 percent by the end of the decade.

Forcing banks to keep more capital on hand will restrict the amount of loans they can make, but it will make them better able to withstand the blow if many of those loans go sour.

U.S. officials say the new standards are a "significant step forward in reducing the incidence and severity of future financial crises."

But some bankers are protesting. They saying the requirements may dampen the recovery by forcing them to reduce the lending that fuels economic growth.


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