A Federal Reserve Board review of capital management methods at several large banks has found major flaws.

In a letter sent Thursday to banks and examiners, the Fed said complex banks must make more sophisticated assessments of their risks when determining capital needs. "Simple ratios-including risk-based capital ratios-and traditional rules of thumb no longer suffice," the agency said in an accompanying press release.

The letter described the basic elements of a "sound" capital analysis and instructed examiners to make sure banks are employing them.

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