JPMorgan Chase (JPM) Chief Risk Officer Barry Zubrow testified before Congress Thursday detailing the extraneous amounts of cash upcoming Basel III requirements will keep in the vaults of major banks. In December, the Basel Committee published a framework for new standards, raising the minimum level of capital banks are required to hold. Along with a conservation buffer required of banks that want to pay dividends to shareholders, financial institutions must maintain 7% common equity. Zubrow said JPMorgan Chase analysis shows the nine systematically important banks could absorb an instantaneous loss equal to two years of their average losses taken during the financial crisis. That's $203 billion, and the banks would still maintain a 5% Tier 1 common capital ratio. The banks are Citigroup (C), Bank of America (BAC), Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), U.S. Bank (USB), Bank of New York Mellon (BK), State Street Corp. (STT) and Chase. The Basel III standards will be phased in beginning in 2013, rising to a final capital requirement of 4.5% – or 7% with the conservation buffer – in 2015. Combined, all parts of the Basel 3 requirements must be implemented by 2019. "Nowhere has change been more profound than with respect to capital," Zubrow said. Federal Deposit Insurance Corp. Chairman Sheila Bair said these institutions and others that did not make it out of the crisis were overleveraged and reform such as Basel 3 will keep another liquidity crisis at bay. "It is clear in retrospect that, during roughly 10 to 15 years preceding the crisis, regulators around the world gave too much weight to promoting competitiveness as it was viewed from the perspective of financial institutions without sufficient regard to the resulting potential for broad economic harm," Bair said in testimony. Daniel Tarullo, a member of the Federal Reserve Board of Governors testified the Basel 3 rules don't go far enough in some points. He expressed the need to expand implementation of the requirements to assure international standards are incorporated into U.S. legislation and regulation. "Here it will be essential for international bodies of regulators to adopt effective oversight and monitoring mechanisms, in order to achieve the financial stability benefits that the minimum standards promise: to prevent the emergence of significant competitive disadvantages for internationally active firms, and promote international cooperation in addressing the technical and policy questions that will arise," Tarullo said. Zubrow said he supported the Basel III requirements for bringing stability to the financial system, but some rules may prove too burdensome. "It is a potential surcharge on Globally Systemically Important Financial Institutions (G-SIFIs) that is a bridge too far, and creates costs that risk exceeding the diminishing benefits of higher capital requirements above Basel III minimums," Zubrow said. Zubrow said Basel III rules effectively require Chase to hold roughly 45% more capital than it did during the crisis. Christopher Whalen, of Institutional Risk Analytics, said if it's assumed there are no extraordinary losses from European debt problems and U.S. housing woes, the banks could be over capitalized. "The regulators need to focus on solvency instead of capital," Whalen said. "Overcapitalized? No. Does the added surcharges go to far, yes. Regulators quite frequently become overzealous following any crisis. This is no different," said J.T. Smith, chief investment officer of the boutique investment bank Aristar Funding Corp. "While I believe that the banks have some heavier than expected losses coming their way, only Bank of America worries me about their ability to survive further deterioration in the housing market." Smith said Chase showed a profit in 2010 because it released these credit reserves. Most banks did while modifying delinquent mortgages, and doing so will force them to rely on all the Basel III 7% just to meet the loss severities on these loans, Smith said. "That being said Basel III is enough, anything more is over reaching and the unintended consequences would kill an already weak economy," Smith said. Write to Jon Prior. Follow him on Twitter @JonAPrior.