Here comes global governance – Obama pushes global bank rules
The Obama administration is pursuing an international agreement to make banks hold significantly larger reserves, which it regards as essential to increase the stability of the global financial system. It wants to complete the negotiations, which are being coordinated by the Basel Committee on Banking Supervision, by the end of the year.
via New York Times
Capital is the body fat of banking: too much is debilitating, too little is fatal. During the financial crisis, as large banks burned through their capital reserves, governments were forced to add padding at public expense.
Now one of the most consequential decisions about new restraints on the banking industry — how much more capital banks should hold in their rainy day reserves — is being decided not on Capitol Hill but far from Washington, by a committee based in Basel, Switzerland, The New York Times’s Binyamin Appelbaum reports.
The Obama administration is pursuing an international agreement to make banks hold significantly larger reserves, which it regards as essential to increase the stability of the global financial system. It wants to complete the negotiations, which are being coordinated by the Basel Committee on Banking Supervision, by the end of the year.
The world’s largest banks have responded with consternation, arguing that the proposed standards would tie up too much money that otherwise could be used for lending, a loss that would curtail economic growth.
The debate between regulators and banks is about the proper balance of growth and safety, but the implications are much broader. In fixing reserve requirements, governments are deciding how much horsepower belongs under the hood of the global economy.
“We need them to get the balance right,” said Douglas J. Elliott, a Brookings Institution expert who has studied the Basel proposals. “More safety will make loans more expensive. We don’t want to buy so much safety that the economy suffers.”
There is tremendous political pressure to decide quickly. With the Senate’s passage of financial regulatory legislation, Obama administration officials said that increasing capital and liquidity reserve requirements were the critical remaining piece in their efforts to overhaul financial regulation.
The Group of 20 nations affirmed the year-end deadline at its April meetings in Washington, notwithstanding divisions between the United States and some European nations on a range of banking issues.
Help Make A Difference By Sharing These Articles On Facebook, Twitter And Elsewhere:
