CFPB Director and SIFMA President Share Contrasting Views on Bank Capital Proposal

CFPB Director Rohit Chopra and SIFMA President Kenneth E. Bentsen, Jr. published opposing public statements on proposed revisions to capital requirements for large banking organizations.

The proposed amendments, recently released by the OCC, Federal Reserve Board and FDIC, are intended to be consistent with international capital standards issued by the Basel Committee on Banking Supervision (see related news).

Mr. Chopra argued that the increased capital requirement will provide a "wide range" of benefits for the economy and "fewer interruption[s] in the availability of credit and financial services." He stated that many studies have shown that the economy would benefit from even more capital requirements than those included in the proposal. Mr. Chopra commended the proposal for addressing loopholes used by banks, such as Silicon Valley Bank, to avoid obligations and ignore unrealized losses on their bond portfolios while interest rates increase. He said that under the proposal, more "rigor" would be added to formulas to judge the riskiness of trading and derivatives activities.

Mr. Bentsen criticized the proposal, stating that the banking regulators "failed to provide justification for such an increase in capital requirements." He stated that the proposed "Basel III ‘Endgame’ will overhaul the current risk-based capital framework," despite the fact that the U.S. markets have been resilient since the 2008 global financial crisis. Mr. Bentsen argued that the proposal does not consider the risk-based capital framework in relation to the U.S. prudential framework, such as the overlap between the Global Market Shock under the Stress Capital Buffer and the proposed market risk capital requirements.