Draft Senate Bill Would Target ‘Too Big To Fail’ Banks With Higher Capital Requirements

Draft legislation authored by Ohio Sen. Sherrod Brown (D) and likely to be cosponsored by Louisiana Sen. David Vitter (R) would attempt to limit the size of “too big to fail” banks by imposing strict capital requirements and preventing them from structuring themselves to elude the rules.

The draft bill, which leaked Friday, would mainly target the six largest banks, since it would impose an even larger capital requirement on banks that exceed $400 billion in total assets, the Wall Street Journal reports:

The draft bill would require all U.S. banks to hold 10% equity capital and subject banks with more than $400 billion in total assets to additional capital surcharges based on the size of the institution. Importantly, the legislation would pull the U.S. out of the Basel 3 international capital accord.

It would also restrict banks from structuring themselves or their activities to avoid the new capital rules, and would prohibit government assistance for non-banks

The bill would also call on the U.S. to replace Basel III international financial regulations, which some financial reform advocates argue would not impose tough enough standards on large banks. Others have raised concerns that replacing Basel III would hurt international efforts to coordinate financial regulations.


Brown has been a strong proponent of reining in large banks, raising concerns over the Justice Department’s lack of prosecutions of Wall Street banks for their roles in the financial crisis. Criticism of “too big to fail” has risen in recent months among both Democrats and Republicans, and Federal Reserve Chairman Ben Bernanke said that such banks were “a real problem” that “needs to be addressed if at all possible” at a press conference in March. The Brown-Vitter legislation hasn’t yet been finalized and isn’t expected to be introduced until later in April.