Page last updated at 06:45 GMT, Tuesday, 23 September 2008 07:45 UK

Fed relaxes bank investment rules

New York Stock Exchange
The move may increase the funding options available to banks

The US central bank has relaxed the rules governing investors who take minority stakes in banks, a move that could encourage greater investment.

The US Federal Reserve said investors can now take a 33% stake in a firm without incurring regulatory hurdles, up from the previous limit of 25%.

Minority investors are also allowed a voting stake of up to 15%, from 9.9%.

The rules apply to any investor, such as private equity firms, that wants to take a minority stake in a bank.

In the past certain groups - notably private equity firms - have been reluctant to invest more than a certain amount in banks because of the implied oversight by the central bank.

Chip McDonald, a partner at law firm Jones Day, said the move should enable greater investment in banks when they most need it.

The credit crisis has made it far harder for banks to gain capital from each other, and therefore more difficult for businesses and individuals to gain access to funding.


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