On Saturday, June 25, the Basel Committee on Banking Supervision announced that all major international banks, and central banks (like the U.S. Federal Reserve) are going to increase their capital reserves.

This means they are going to hold onto more money and issue less loans.  Some banks refer to capital reserves as putting their money to ‘rest’ (aka bank reserves, desired reserves).

The Basel Committee on Banking Supervision refused to give a list of which banks will be holding back on their money.  This is an indication that the major international, and central banks do not expect any short term improvement in the world economies.

The increase in capital reserves is to help banks handle monetary emergencies, like traditional “runs on banks”.  Just how long does the Basel Committee on Banking Supervision think the economy will suck?  The new tighter control on money will be implemented in phases, becoming fully in effect in 2018.  Mmmm, it’s 2011 now, uh oh!