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Investors to separate sheep from goats
Breakingviews Editor Rob Cox says the Federal Reserve's bank stress test results will allow investors to separate the goats from the sheep and the tests are capitalism at its finest. Video
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Bernanke says Fed to make bank rules clearer
Federal Reserve Chairman Ben Bernanke testifies before the Senate Banking Housing and Urban Affairs committee in Washington March 1, 2012.
Credit: Reuters/Gary Cameron
WASHINGTON |
WASHINGTON (Reuters) - The Federal Reserve will try to make it clearer whether new banking rules apply to small lenders, Federal Reserve Chairman Ben Bernanke said in remarks on Wednesday.
Bernanke said the goal is to prevent community banks from wasting time and money trying to figure out if a new regulation applies to them.
"Although this change seems relatively simple, we hope it will help banks avoid allocating precious resources to poring over supervisory guidance that does not apply to them," Bernanke said in a video message to an Independent Community Bankers of America conference in Nashville, Tennessee.
Bernanke said the Fed is also taking steps to improve communications with small banks and to better understand the challenges facing the industry, including the creation of a subcommittee to review how community banks are supervised.
Bernanke told the group that the outlook for small banks is improving but that the economy continues to pose challenges for the industry.
"Despite some recent signs of improvement, the recovery has been frustratingly slow, constraining opportunities for profitable lending," Bernanke said.
Bernanke also sought to calm fears among community bankers that the 2010 Dodd-Frank financial oversight law will have a big impact on their businesses.
He told the conference that most of the new standards in the law are geared at making changes only to the largest banks.
"These new standards are not meant to apply to, and clearly would not be appropriate for, community banks," Bernanke said. "We will work to maintain a clear distinction between community banks and larger institutions in the application of new regulations."
(Reporting By Dave Clarke; Editing by Andrea Ricci)
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1. If banks already look at the credit information provided by credit ratings when setting interest rates, amount to lend and other terms, is it intelligent for the regulators to also look at the same credit ratings, or similar risk perceptions, in order to define the capital requirements for banks? Is that not overdoing the nanny part a bit too much? Could that not lead to a dangerous overexposure to whatever is officially deemed as absolutely not risky? Like for instance to triple-A rated securities and infallible sovereigns?
2. And is not the whole idea of lower capital requirement for banks when the perceived risks are low just a quite dumb idea to begin, knowing, as we do, that big systemic bank crises never ever occur because of excessive exposures to what is believed to be risky, but that they always occur because of excessive exposures to what was wrongfully believed as absolutely not-risky?
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