The US Federal Reserve has approved new caps on the credit exposures of big banks, in the hope of limiting the possibility that the failure of one of them may drag down the rest. The new regulation requires any bank with more than $250 billion in consolidated assets to limit its credit exposure to any particular counterparty to a maximum 25 per cent of its tier 1 capital. The rule is one of the last pieces of the 2010 Dodd-Frank Act awaiting implementation. The biggest "globally significant" banks (GSIBs) have even tighter restrictions: a credit exposure of no more than 15 per cent of the tier 1 capital of another GSIB.