Regulators around the world want large banks — the “too big to fail” banks — to hold more capital.
It’s a truth universally acknowledged that big banks resist when the government proposes more financial regulation. This familiar story is playing out once again as regulatorsseek to impose higher capital requirements on systemically important banks — those deemed “too big to fail.” This is a fancy way of saying they want banks to set aside larger rainy-day funds so they won’t need taxpayer bailouts in the next crisis. Prominent bankers argue there’s no need for the proposed rules,.
Big banks have made similar warnings every time regulators have called for higher capital requirements since the calamitous 2008 financial crisis. Yet the financial system is still flourishing. Loans remained widely accessible after past capital increases,. Ratcheting up capital levels a bit now is wise, given the uncertain geopolitical and economic climate.
Bankers do make one compelling argument: The financial world has changed dramatically in the past 15 years, but the Basil III endgame looks backward to problems like those that precipitated the 2008 crisis instead of focusing forward to new sources of risk.’s collapse a year ago. On paper, the bank had sufficient capital in the form of government bonds purchased before the Federal Reserve hiked interest rates.
And yet the heated debate over Basel III has diverted energy and attention from the issues around non-banks. Last month, Federal Reserve Chair Jerome H. Powell. Lawmakers from both parties asked repeatedly about his position on Basel III. Mr. Powell said he expected “there will be broad and material changes to the proposal” and that he was “confident” the final proposal would have broad support “both at the Fed — and in the broader world.
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