Fed to Release Core Dodd-Frank Rules on Tuesday

WASHINGTON — A long-awaited package of critical regulations from the Federal Reserve Board — viewed by many as the core of the Dodd-Frank Act — is expected to be released Tuesday, according to a source familiar with the matter.

There's been wide speculation in Washington that the Fed is imminently close to completing the batch of rules, which were once believed to be upward of 2,000 pages but are more likely to be around 400 pages.

The rules, which would implement Sections 165 and 166 of the Dodd-Frank, had been expected to come out this summer, but due to the complexity of the effort were delayed.

Regulators needed additional time because the rules involved multiple moving parts and entirely new policy areas.

The basic concepts of the rules were in place by late spring, but because staff had relatively little experience with some of these areas, they frequently had to pause, adjust language and redraft.

Staff were also frequently being diverted to other rulemaking, slowing the process down further.

The Fed board met late Monday in closed session. All five governors need to approve the rules before they can be issued. The regulations cover some of the biggest issues in financial services, including risk-based capital requirements, leverage, resolution planning and concentration limits. They are also expected to detail how the Fed plans to regulate large, interconnected financial institutions — as well as nonbanks — for the first time.

The Fed has kept its thinking on the rules very close to its vest as it has spent the last year debating what some say will be the new gold standard for the industry.

The banking industry will be looking closely at what the Fed specifies when it comes to capital, liquidity and leverage rules, especially in light of the Basel III regulations.

Under Dodd-Frank, Fed-supervised banks with assets of more than $50 billion will face stricter capital and liquidity requirements. The eight largest U.S. banks have already been designated by the Basel Committee on Banking Supervision, and will face an additional surcharge of 1% to 2.5% starting in 2016. It remains unclear exactly how much each institutions will pay.

Also unknown is what will happen to the banks with $50 billion or more of assets under the Fed's supervision that are not considered globally systemically important banks.

In past speeches, Fed Gov. Daniel Tarullo has suggested a surcharge could be applied to U.S. firms that meet the $50 billion threshold, but has said regulators remain undecided on which way to go. But any surcharge applied by the Fed to these holding companies would be "quite modest," he has said.

Fed officials have previously stressed the Fed has been "attentive" to coordinating rules required by Dodd-Frank with higher capital standards and new liquidity standards for large banks under the Basel rules.

Tarullo has also said that the special resolution regime and enhanced capital requirements under Dodd-Frank would be viewed by the Fed as "complementary rather than as substitute" to Basel III.

Bankers had initially hoped that the Dodd-Frank requirements might slow the push for an additional capital surcharge. Many are still upset about the new capital requirements. Brian Moynihan, chief executive of Bank of America, warned Monday that higher capital requirements will force banks to curtail lending. "For every 100 basis points in capital, you're talking about 10% less lending we can do on our balance sheet. It's a pretty simple set of math," he said at a Charlotte Chamber of Commerce economic outlook conference.

Banks may have more success, however, in revising certain liquidity requirements.

Tarullo has said regulators plan adjust the framework being developed by the Basel Committee to reflect concerns both by the U.S. and other central bankers.