Statement by the Systemic Risk Council on Bank Capital Requirements

Press Releases and Statements Read time:

Navigate to:

  • Table of Contents
Statement by the Systemic Risk Council on Bank Capital Requirements

Sheila Bair, former chair of the FDIC and current chair of the Systemic Risk Council (SRC)1 issued the following statement on the Council's behalf in advance of today's Senate Banking Committee Hearing “Oversight of Basel III”:

“While we commend the financial agencies for seeking public comment on important rules that raise the overall level of capital required for large, complex financial institutions, we have strong concerns about regulators' continued willingness to allow these giant institutions to use their own internal risk models to lower their minimum required regulatory capital.  Not only do models routinely fail in a crisis (precisely when we need loss absorbing shareholder equity most) - their use for regulatory capital purposes can create perverse incentives for risk management and real competitive advantages for larger firms relative to smaller firms doing the same activity.”

“Minimum risk-based capital requirements should be just that: a minimum.  If internal models identify additional risks that require higher capital, firms should be required to raise more equity.  Management, boards, examiners, investors and counterparties deserve an objective and clear minimum risk-based capital baseline.”
“To get the necessary capital in place quickly, the SRC has encouraged the regulators to prioritize implementing Basel III for the large, internationally active banks, while at the same time strengthening the Basel III leverage ratio by raising it to 8 percent.”

“It is important for the US to exercise global leadership. Strong capital requirements are a competitive strength, not weakness, and essential to system stability.”

The Systemic Risk Council2

Chair: Sheila Bair, The Pew Charitable Trusts, Former FDIC Chair

Senior Advisor: Paul Volcker, Former Federal Reserve Chair

Members
Brooksley Born, Former U.S. Commodity Futures Trading Commission Chair  
Bill Bradley, Former U.S. Senator (D-NJ)
William Donaldson, Former U.S. SEC Chair
Harvey Goldschmid, Columbia Law School, Former U.S. SEC Commissioner
Jeremy Grantham, Co-founder & Chief Investment Strategist, Grantham Mayo Van Otterloo (GMO)
Chuck Hagel, Distinguished Professor, Georgetown University, Former U.S. Senator (R-NE)
Richard Herring, The Wharton School, University of Pennsylvania
Simon Johnson, Sloan School of Management, Massachusetts Institute of Technology
Hugh F. Johnston, Exec. VP & CFO, PepsiCo
Ira Millstein, Chair, Columbia Law School, Center for Global Markets and Corporate Ownership
Maureen O'Hara, Johnson School of Management, Cornell University
Paul O'Neill, Former CEO, Alcoa, Former U.S. Treasury Secretary
John Rogers, CFA, President and CEO, CFA Institute
Alan Simpson, Former U.S. Senator (R-Wy)
Chester Spatt, Tepper School of Business, Carnegie Mellon University, former U.S. SEC Chief Economist

----

1The independent, non-partisan Systemic Risk Council was formed by CFA Institute and the Pew Charitable Trusts to monitor and encourage regulatory reform of U.S. capital markets focused on systemic risk.  The statements, documents and recommendations of the private sector, volunteer Council do not necessarily represent the views of the supporting organizations.

The Council works collaboratively to seek agreement on all recommendations.  This report fairly reflects the consensus views of the Council, but does not bind individual members.

2Affiliations are for identification purposes only.  SRC members participated as individuals; the statement reflects their own views and not those of organizations with which they are affiliated.

America’s Overdose Crisis
America’s Overdose Crisis

America’s Overdose Crisis

Sign up for our five-email course explaining the overdose crisis in America, the state of treatment access, and ways to improve care

Sign up
Quick View
America’s Overdose Crisis

America’s Overdose Crisis

Sign up for our five-email course explaining the overdose crisis in America, the state of treatment access, and ways to improve care

Sign up
RELATED
Topics
Fiscal & Economic Policy Family Finances

ADDITIONAL RESOURCES

An illustration of a couple holding hands walking away from an outline of houses behind them

Podcast

March 22, 2024 Pathways to Homeownership: Housing in America
Under a brilliant blue sky, large chunks of glacial ice float in dark waters, framed by a glacier-topped rock wall in the background.

Article

February 21, 2024 A New Beginning for Chile's Protected Areas
A close-up of four microphones, two each being held by two hands. The mics are directed toward a person, visible only from the chest down to the thighs, standing near a podium, wearing a blue shirt, grey slacks, and a burgundy tie. Two other microphones are also visible at the left of the image. Five State Fiscal Debates to Watch in 2024

MORE FROM PEW

A pair of white and black Adélie penguins standing in the middle of a clump of snow face opposite directions. Seeing Antarctic Change, Scientist Calls for Stronger Action
A shipyard with towers in the foreground, a barge on a river, and a blue sky in the background. Louisiana Primed to Take Helm of Offshore Wind Supply Chain
About a dozen people stand examining large blue bins full of whole fish in a warehouse. Some people are in green clothes, others in blue, and all wear ballcaps. A few hold clipboards. Reducing Risk Strengthens the Seafood Supply Chain
A worker in a seafood market dumps bright orange shrimp from a blue bin onto a bed of ice between a lot of other seafood laid out for sale. Other workers are visible in the background, as are the arms of shoppers placing orders from the other side of the ice bed. Seafood Industry Benefits From Greater Vessel Transparency
Composite image of modern city network communication concept

Learn the Basics of Broadband from Our Limited Series

Sign up for our four-week email course on Broadband Basics
Quick View

How does broadband internet reach our homes, phones, and tablets? What kind of infrastructure connects us all together? What are the major barriers to broadband access for American communities?

Pills illustration
Pills illustration

What Is Antibiotic Resistance—and How Can We Fight It?

Sign up for our four-week email series The Race Against Resistance.
Quick View
Pills illustration

Antibiotic-resistant bacteria, also known as “superbugs,” are a major threat to modern medicine. But how does resistance work, and what can we do to slow the spread? Read personal stories, expert accounts, and more for the answers to those questions in our four-week email series: Slowing Superbugs.