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Friday, August 10, 2012

Basel Global Capital Standards Bad Fit for U.S.

Wayne Abernathy, EVP of financial institutions, policy and regulatory affairs at ABA, wrote about the dangerous of the Basel global capital standards in an Bloomberg op-ed published today.
If imposed without adjustments the new Basel rules will deliver another body blow to an American economy already reeling from uncertainty, huge government deficits and debt, and the threat of major tax increases.

Hundreds of pages of the basic rules apply to all banks regardless of size, complexity, or risk. Federal Reserve experts … estimate that it will require American banks at the least to add $60 billion to their currently high capital levels.

Without the new Basel standards, banks could take in those $60 billion from investors and use them to support $600 billion in new loans and services, as banks today hold about $10 for every $100 dollars in loans.

[H]olding adequate capital has not been a problem for the American banking industry, whatever other faults banks may have. Before the recession, American banks held $1.4 trillion in capital, which dropped to $1.3 trillion at the bottom of the recession. Today, American banks hold a record $1.6 trillion in capital.
Read the full op-ed.

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