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Acting Comptroller of the Currency John Walsh said his agency favors a relatively "modest" capital surcharge for the largest banks, but acknowledged that other banking agencies are pushing for a higher one.
June 20 -
A top JPMorgan Chase & Co. official will tell lawmakers that an international regulatory plan to charge the largest banks an extra fee for the risk they pose to the economy is unnecessary and unfair.
June 15 -
WASHINGTON — While regulators followed through Tuesday on a mandate to set an across-the-board capital floor, they signaled that bigger — and still-contentious — discussions lie ahead on more meaningful capital changes.
June 14 -
WASHINGTON — Bank holding companies with total assets of more than $50 billion will be expected to submit yearly capital plans to its regulator starting next year, the Federal Reserve Board said Friday.
June 10 -
Federal Reserve Board Gov. Dan Tarullo's speech last week that the largest banks may have to hold even more capital than previously expected touched off a fierce debate: how much capital is enough?
June 8
WASHINGTON — The heads of the central bank and the Federal Deposit Insurance Corp. were in two different places Wednesday but seemed to be reading off the same cue card in addressing capital concerns.
Federal Reserve Board Chairman Ben Bernanke sought to assure big U.S. banks that their fears about the burden of new capital requirements are misguided.
"The capital that has been imposed so far would significantly reduce the threat of a massive financial crisis. On the other hand, [it would] have very small effects on growth," Bernanke told reporters at a press conference following the conclusion of the two-day Federal Open Market Committee.
"I don't think we are on the wrong side of that trade-off."
Global regulators are in the midst of negotiations under which global institutions will be identified as systemically important and be subject to a special capital surcharge. Investors have broadly estimated that the surcharge would be around 3%.
Meanwhile, FDIC Chairman Sheila Bair said a 3% capital surcharge on systemically risky firms would be a "moderate" approach.
Testifying at her last congressional hearing before her scheduled departure from the FDIC July 8, Bair, who has openly supported a 3% surcharge before, said the amounts being discussed by regulators "have very much tried to strike the right balance."
Bair's appearance came days after John Walsh, acting comptroller of the currency, said in an American Banker interview that while U.S. regulators were debating a range of surcharges between 1% and 3% his agency supports something on the lower end of that spectrum.
A 3% surcharge on systemically important firms would be imposed on top of the 7% capital standard outlined in the Basel III accord.
"That is actually moderate when you look at most of the studies that have been independently done by academics or the government," Bair said of a 3% charge.
Bernanke said it is "appropriate" that the systemically important financial institutions, or SIFIs, be required to hold additional capital in the form of a surcharge.
"The failure of large financial institutions was a major contributor to that crisis. We need to take extra steps to make sure that they would be very unlikely to fail," said Bernanke. "It's important to do that."
Offering some assurance, Bernanke said negotiators will be trying in the coming weeks to "balance on the one hand the need for extra safety of systemically important firms against the impacts on lending."
The Basel Committee on Banking Supervision is expected to release its proposal, which will be open for comment, in July.
Banks have become increasingly alarmed that new capital and liquidity requirements coupled with regulations under the Dodd-Frank Act will go too far and are moving so quickly that it could potentially have unintended consequences on lending.
"It's very, very difficult to make a broad-based assessment of the overall impact of all of the rules and regulations," Bernanke acknowledged, adding that the Fed conducts a cost-benefit analysis for every rule it implements.
Fed Gov. Daniel Tarullo earlier this month raised the prospect that the surcharge could go as high as 7%, causing alarm by banks. Since then, he has backed away from those remarks, saying he was referencing a number proposed by analysts here and abroad who have tried to estimate how high the surcharge should be.
On Capitol Hill, Bair also took further questions about community bank concerns about overaggressive examinations. She said to some extent it is challenging for the FDIC to rectify cases of overreach because bankers are not always forthcoming with clear examples.
"I don't know what else I can do. If people don't want to come forward, there's just not much I can help with," she said before a House Government Oversight subcommittee.
On exams, Bair said the agency takes "appropriate action" when complaints reveal that errors were made.
"On the other hand, when we have received complaints and we've drilled down into it, sometimes examiners are just being blamed for bringing the bad news," she said. "Bank management is not always realistic about the extent of their troubles."
Rep. Patrick McHenry, R-N.C., said the subcommittee had invited industry representatives to testify at the hearing and plead their case, but they declined.
"It's not personal. It's either they don't want to air complaints publicly … or are they fearful of what the public thinks of them" complaining? he said. "Or is it one of those things where they'll grumble, but they really don't want to get into the specifics? … I thought that was a little odd. I am concerned about regulatory overreach … but there is a balance."
Bair said under her leadership and that of Vice Chairman Martin Gruenberg, who has been nominated to succeed her, the agency's policy is and will be to investigate complaints.
"It has frustrated me, though, because I get a lot of generalized complaints, but when I say, 'Tell me what it is so I can fix it,' I don't get any specifics," she said.
