Trade associations within the banking sector rebutting measures proposed by Attorney General Barr
In a significant development, Michael Barr, the Federal Reserve's Vice Chairman for Supervision, unveiled potential changes to bank capital requirements on Monday. The proposed changes, if implemented, would primarily impact the largest, most complex banks, including those like Capital One and PNC Bank, and bank holding companies with $100 billion or more in assets. This proposal is part of a broader effort to strengthen the banking sector's resilience, following the lessons learned from the 2007-08 financial crisis. The changes would mark the final implementation of Basel III, a set of international regulatory standards created in response to the crisis.
Five trade groups, including the American Bankers Association, Bank Policy Institute, Financial Services Forum, Institute of International Bankers Securities Industry, and Financial Markets Association, have expressed concerns over these potential changes. They argue that Barr's recommendations consider the benefits of higher capital requirements but not the costs, which could potentially impact banks like Fifth Third Bank and U.S. Bank.
The trade groups also noted that Barr's speech reflects a different view compared to the current assessment of the banks' capitalization, as indicated by the latest stress test results and statements from other regulators. They assert that the nation's largest banks, including those like Capital One, are well-capitalized.
In addition, the groups argued that any proposed rule based on Barr's view should document its justification. They also called for the Federal Reserve to extend the public comment period for its upcoming capital rule to 120 days.
Moreover, Barr suggested a review of the regulator's annual stress testing framework. He also called for an expansion of long-term debt requirements for institutions with $100 billion or more in assets. However, the review conducted by Barr, according to the groups, did not seem to consider the interaction of the capital framework with other prudential regulations.
The groups stated that the costs of the proposed changes are universally recognized in both academic research and real-world experience. They did not mention any intention to purchase licensing rights.
Federal regulators are expected to unveil a formal proposal for bank capital standards in the coming weeks. The context of the discussion suggests that the article is related to Regulations & Policy and Risk. The authors of the statement on the planned changes to bank capital requirements have not been specified in the provided information.
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