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Wednesday, July 10, 2013

ABA Criticizes Leverage Ratio Proposal

ABA President and CEO Frank Keating strongly criticized the interagency supplemental leverage proposal issued yesterday, arguing that it will tighten lending, reduce the competitiveness of U.S. banks and undermine international cooperation on capital standards.

“Just when there appears to be some agreement on international capital standards, U.S. regulators are proposing to undermine the whole exercise under a mistaken belief that doubling capital requirements will have no impact on credit availability or the ability to hedge risk,” Keating said. The requirement “adds little protection, and may adversely affect the level and cost of credit that’s so vital to continued economic expansion.”

Keating emphasized that U.S. banks are at historically high capital levels, and that Federal Reserve stress tests demonstrate their resilience at current levels. In addition, he urged regulators to exclude from the leverage ratio “safe assets” held for liquidity, such as treasuries or reserves held at a central bank.

Read Keating’s statement.

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