Fed's Tarullo wants tough bank capital standards

Banks must face tough capital standards that allow them to not only survive a major storm but also to keep lending to other institutions even in times of stress, a top Federal Reserve official said on Thursday.

Daniel Tarullo, a Fed board governor who supervises regulatory affairs at the US central bank, said it was unclear that bigger is always better for the banking sector, citing the lack of research on the "social utility" of super-sized financial firms. Capital requirements should be set so that firms designated by Congress and regulators as systemically important could "reasonably be expected to absorb losses associated with systemic stress without extraordinary government assistance, and still be well enough capitalized to serve as sound intermediaries," Tarullo told a conference sponsored by the Richmond Fed. His comments come just as the Fed released gobs of data on emergency lending during the financial crisis, highlighting just how dependent both US and foreign banks were on the help of monetary authorities in the worst months of the turmoil.