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Thursday, April 25, 2013

Brown, Vitter Introduce ‘Too Big to Fail’ Bill

Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) introduced legislation (S. 798) which would require large banks to hold significantly higher capital.

The legislation would take the U.S. out of the Basel III capital standards and instead require regional banks—those between $50 billion and $500 billion in assets—to hold 8 percent capital, and the largest banks—those with over $500 billion in assets— to hold 15 percent capital. Regulators would determine capital levels for banks with less than $50 billion in assets.

The bill adds other restrictions on the activities of very large banks and provides some regulatory relief to community banks, especially those with less than $10 billion in assets. For example, it expands the definition of rural lenders eligible to provide balloon mortgages and creates an ombudsman for bank examination fairness.

“The banking industry strongly supports adequate, high-quality capital,” said ABA EVP James Ballentine. “However, the proposal, as introduced, would impose arbitrarily high levels that would harm banks and their customers, local communities and the broader economy.”

Ballentine noted that bank capital is at “near-record levels” and growing. “Raising capital-to-asset ratios would require many banks to shrink their businesses, resulting in substantially decreased lending, tighter credit availability and higher costs to borrow,” he added.

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