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"This action is being taken in light of continued stress in financial markets and the efforts of BHCs (bank holding companies)to increase their overall capital levels," the Fed explained in a statement.
According to the statement, the new limits have been put off until March 31, 2011.
These new limits, which were scheduled to take effect on March 31, 2009 and pursuant to a final rule adopted by the central bank on March 10, 2005, will put tighter requirements on banks' capital levels, the key measure of a bank's financial health.
The delay will further the Fed's efforts, as well as the efforts of the other federal banking agencies and the Treasury Department to respond to the current financial situation, the statement said.
The Fed's decision affects how a bank can count preferred stocks and securities -- such as those injected by the Treasury Department to steady the financial system -- in its core capital.
"As a result of delaying implementation of the new limits and until the new effective date in 2011, all BHCs may include cumulative perpetual preferred stock and trust preferred securities in tier 1 capital up to 25 percent of total core capital elements," it said.
Tier 1 capital, a term used to describe the capital adequacy of a bank, is composed of core capital, which consists primarily of common stock and disclosed reserves, but may also include irredeemable non-cumulative preferred stock.