Bank capital: A worrying wobble

Posted: January 17, 2014 in economy
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Bank capital


Bank regulators should not have weakened rules that limit leverage

IN THE immediate aftermath of the financial crisis, politicians and regulators from around the world stood shoulder to shoulder and promised to tame the excesses in the banking system that had brought the global economy to its knees. Among the first of their proposed reforms was to have more loss-absorbing capital in banks to reduce the risks of future taxpayer-funded bail-outs. How quickly memories fade.
On January 12th the Basel committee, a club of central bankers and supervisors, released new rules that are weaker than their previous proposals (see article). The technical tweaks may let big banks—mostly European ones—off the hook of having to raise as much as €70 billion ($96 billion) in capital. Although banks will still have to meet a leverage target of at least 3%, the formula for calculating it has been softened. The next day brought a surge in the share prices of big banks, which had …

via Economic Crisis


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