The Federal Reserve has set limits aimed at addressing one of the leading causes of the 2008 financial crisis — the buildup of loans extended by one bank to another among the biggest Wall Street institutions.
The Fed unveiled a new rule Thursday that caps a big bank’s credit exposure to another bank. The rule is close to a proposal the central bank floated two years ago, but it makes revisions for the credit limits to be tailored to the size of the bank. That’s in line with the Fed’s current approach to regulation under new leaders appointed by President Donald Trump.
The aim of the rule, applied to banks with assets of $250 billion or more, is to help bolster the stability of the financial system.