The governor of the Federal Reserve (FED) and Vice President of Supervision, Michael Barr, proposed on Monday a series of changes in the US banking system, including tougher capital requirements for large and medium-sized banks, with the aim of avoiding new bankruptcies.
In a speech at the Bipartisan Policy Center think tank, Barr laid out his vision for updating capital standards, the result of a review that focused on capital requirements for banks with more than $100 billion in total assets.
“I reviewed whether changes would be appropriate to better align capital requirements with risk taking, to help ensure our banking system is resilient enough to fulfill its vital role in our economyBarr said in his speech.
Among the proposed measures is to include banks with more than 100,000 million in total assets in banking supervision. These banks will have to meet stricter capital standards, put aside additional capital to better prepare for emerging risks.
Barr’s vision, which as he himself warned is personal and not that of the FED, is the same as the proposal of other institutions such as the Federal Deposit Insurance Corporation (FDIC).
Last June, its president, Martin Gruenbergadvocated in a speech for “stricter supervision” of this type of bank.
“A threshold of $100 billion would subject more banks to our more risk-sensitive capital rules compared to the current framework, which applies to companies that are internationally active or have $700 billion or more in assets.”, barrel in his speech.
The recent experienceshows that even banks of this size can cause stress that spills over to other institutions and threatens financial stability”, he stated in a clear allusion to the instability caused by the bankruptcy at the beginning of the year of Silicon Valley BankFirst Republic Bank and Signature Bank.
And therefore, he added, “the risk of contagion implies that we need a higher degree of resilience from these entities than we previously thought”.
Source: EFE
Source: Gestion
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