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People walk by the headquarters of Morgan Stanley in New York in this June 1, 2012, file photo.
People walk by the headquarters of Morgan Stanley in New York in this June 1, 2012, file photo.
(ERIC THAYER/REUTERS)

Tougher rules for banks that invest in outside funds

A global watchdog is cracking down on banks that invest in external funds, such as hedge funds and private equity funds, by forcing them to beef up their capital levels when dabbling with risky investments.

Come 2017, banks will be required to enhance their capital cushions whenever external funds in which they have invested use a lot of leverage, and they will be forced to dramatically boost their capital whenever these funds offer only opaque descriptions of their investment activities.