14 June 2010

Geithner seeks unity on bank capital standards

Treasury Secretary Geithner warned senior U.S. bank regulators that their differences could undercut the U.S. government as it negotiates new international bank standards with other countries, the Washington Post reports.

Treasury Secretary Geithner warned senior bank regulators that their differences could undercut the U.S. government as it negotiates new international bank standards with other countries, the Washington Post reports.

 

Regulators have been divided over how much money banks should hold in reserve to protect themselves against unexpected losses.

 

FDIC chair Sheila Bair has thrown her support behind a measure offered by Sen. Susan Collins (R-Maine) that could force banks to raise tens of billions of dollars to replace a less stable form of capital in their reserves. The Senate approved the proposal as part of the legislation overhauling financial regulation, though the measure could be changed when House and Senate lawmakers hash out differences in their bills beginning this week.

 

Treasury and the Fed oppose the proposal because encoding such requirements into U.S. law "eliminates a negotiating chip" that could be used to obtain concessions from European nations, a senior government official said, speaking on the condition of anonymity because the discussions were private.

 

In general, U.S. regulators agree that capital standards at banks were too weak during the financial crisis.

 

Geithner has said that raising capital standards is at the core of efforts to overhaul the financial system. The crisis pulled back the curtain on capital buffers that were too small or of low quality. Those shortcomings triggered a crisis of confidence in the nation's banks. Some firms collapsed during the panic, nearly taking the entire system with them.

 

 

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