Senators Urge Regulators to Adopt "Basel" Bank Capital Standards
Commentary by Steven Lofchie
Twelve Senate Democrats ("Senators") urged FRB Vice Chair Michael S. Barr, FDIC Chair Martin J. Gruenberg and OCC Acting Comptroller Michael J. Hsu to adopt proposed regulatory capital rules "to complete adoption of the Basel standards, strengthen the resiliency of our financial system, and ensure that American consumers, workers, and businesses are better protected from future economic distress."
In a letter sent to the three regulators, the Senators highlighted various risks and loopholes exposed by incidents like the collapse of Silicon Valley Bank, as well as the importance of robust capital for the financial system's resiliency and protection against economic downturns. The Senators emphasized that the adoption of the proposed capital rules would ensure "sustained access to affordable credit for the people and places historically left behind," and close regulatory gaps for banks with assets between $100 billion to $250 billion.
Commentary
It is instructive to read the Senators' letter in connection with Comptroller Hsu's remarks in today's newsletter, as Mr. Hsu's statement makes clear that the problems causing bank runs are complicated, that these problems are not just about "more," or stricter regulation and that the way to fix the problems is not so apparent. Beyond that, Mr. Hsu points out that one of the great fixations of the post-2008 crash interconnectedness was not relevant to recent bank failures (and thus perhaps was not that determinative in 2008 either?). However, complexity doesn't generally sell.