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Futures on the Dow Jones (INDEXDJX:.DJI) are trading 142 points above fair value and futures on the S&P 500 (INDEXSP:.INX) are higher by 17 points after financial authorities from over 20 countries have released details of new banking rules regarding bank capital. Known as Basel III, the rules will require banks to raise common equity levels from 2% to 4.5% and Tier 1 ratios shall be raised from 4% to 6%. A countercyclical buffer within a range of 0% – 2.5% of common equity will also be required raising the total capital requirement to 7%. The rules, which will need to be ratified by the G-20 nations, require that banks comply with these minimum ratios within five years and those that do not meet the requirements will not be permitted to pay dividends but will not be forced to raise capital. Analysts had expected Tier 1 requirements to be raised to 8%, so perhaps the slightly lower capital requirements and the later deadlines are being viewed as positive by investors.
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News Update: Stock Futures Rise on New Basel III Banking Rules
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