The Federal Reserve approved new rules last week to implementglobal Basel III capital-adequacy standards and applied thoserequirements to virtually all U.S. financial institutions. The movemay make providing services to middle-market corporate clientsprohibitively expensive for banks.

Other U.S. banking regulators are expected to follow the Fed'slead and approve similar rules soon. Ultimately, brokers and othernonbank entities are expected to be subject to similarstandards.

The Fed rules, which will be fully in effect by 2019, requirefinancial institutions to hold common equity equal to 4.5% of theirrisk-weighted assets and an additional 2.5% buffer, for a totalequity cushion of 7%. That compares with a current standard thatcan be as low as 2%. The largest institutions will be tagged with acapital surcharge between 1% and 2.5%.