Bank Stocks Drop on Word Fed Plans New Capital Rules

Bank stocks fell Thursday following comments by Federal Reserve Board Chairman Alan Greenspan that the Fed is developing additional new capital requirements for U.S. commercial banks and stiffer penalties for institutions that fail to meet them.

Greenspan told the Senate Banking Committee that the moves will mean tighter or possibly no bank credit at all for some borrowers. He warned that the move would tend to force a further consolidation of the banking system.

“Higher capital should go a long way toward inducing market-like behavior by banks,” Greenspan said, echoing sentiments that the stiffer requirements would force bank owners to be more careful in their activities because they would have more of their own money at risk.

Following Greenspan’s remarks, bank stocks dropped, despite the Fed chief’s other remarks Thursday that the central bank may push interest rates lower--news that normally boosts bank stocks. Chase Manhattan lost 87.5 cents a share to close at $22.50, Citicorp fell 25 cents to finish at $21.625, Manufacturers Hanover declined 87.5 cents to end at $31.75 and Chemical Bank slipped 50 cents to close at $24.375. Stocks of smaller banks also slipped.

The rules would go beyond risk-based minimum capital standards set to phase in at the end of this year and take full effect in 1992, Greenspan said.