WASHINGTON, Oct. 24 (Xinhua) -- U.S. Federal Reserve on Thursday said that it would require American banks to hold minimum amounts of cash and high-quality liquid assets to help the financial system better cope with risks during market turbulence.
Large U.S. banks with 250 billion U.S. dollars or more in total assets would be required to hold enough cash and high-quality liquid assets such as government and corporate debt that can be converted easily and quickly into cash to fund their operations for 30 days during a time of market stress, the Fed said in a statement.
The U.S. central bank, however, sets less stringent conditions for smaller banks. Banks with more than 50 billion dollars and less than 250 billion dollars in total assets would be required to keep enough cash and high-quality liquid assets to fund their operations for 21 days, according to the statement.
"Liquidity is essential to a bank's viability and central to the smooth functioning of the financial system," said Fed Chairman Ben Bernanke. "The proposed rule would, for the first time in the United States, put in place a quantitative liquidity requirement that would foster a more resilient and safer financial system in conjunction with other reforms."
The proposal is scheduled to phase in starting Jan.1, 2015 and to be fully implemented by Jan. 1, 2017, said the Fed in the statement.
The Fed's top officials approved the proposal at a meeting held Thursday, but the proposal also needs to be approved by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, two other U.S. financial regulators, before it becomes effective.