WASHINGTON - Banks that make and sell pools of risky loans face higher capital requirements under rules proposed Monday by federal regulators.
The proposal would require banks to hold $1 of capital for each $1 of residual interests in pools of high-risk securitized loans. However, these assets could account for no more than 25% of Tier 1 capital. (The proposal defines residual assets as the interest that an institution keeps after securitizing and selling assets.) Regulators are concerned that banks are overvaluing residual interests.