| WASHINGTON, April 5
WASHINGTON, April 5 The largest U.S. banks would
have to hold far more capital under a proposal from two U.S.
senators that would toss out international bank capital rules,
according to draft legislation.
The draft bill, which was obtained by Reuters, calls for
regulators to throw out the Basel III capital accord and instead
require U.S. banks to hold an equity capital ratio of no less
than 10 percent of total assets.
The biggest banks, those with more than $400 billion in
total assets, would face an additional capital surcharge under
the proposal from senators David Vitter, a Louisiana Republican,
and Sherrod Brown, an Ohio Democrat.
The debate about too-big-to-fail banks has heated up in
recent weeks in Washington, with politicians and even some
regulators calling to do more to protect taxpayers from footing
the bill the next time a bank goes belly-up.
"If you thought that the biggest megabanks were too big to
fail before the crisis, then I have bad news for you, they have
only gotten bigger," Brown said in February.
The 2010 Dodd-Frank overhaul of Wall Street has not done
enough to address the risk in big banks, these groups say.
But there is little chance of political consensus over the
plans to carve up banks such as JP Morgan Chase & Co,
Citigroup Inc, Bank of America Corp or Morgan
"There's very little political will today ... There's a
significant minority who would like to go forward, but nothing
approaching a majority," said Douglas Elliott, a fellow at the
"That said, we're one or two banking scandals away from
there being a real probability from this happening."
The bill would also prevent banks' riskier affiliates from
accessing government support such as deposit insurance.
Brown's office declined to comment on the draft. Luke Bolar,
a spokesman for Vitter, said the bill is still being refined and
that the draft was removed from a meeting.
"A Wall Street lobbyist stole and distributed a copy of our
draft bill to try and drum up support for protecting the big
banks' taxpayer funded handouts - and ultimately remain
too-big-to-fail," Bolar said on Friday.
The Basel capital agreement also calls for banks to hold
higher capital ratios, but these levels are determined based on
the riskiness of their assets, making them less demanding than
the Brown/Vitter proposal.
Many lawmakers, banks and even some regulators, have also
criticized the Basel approach as too complicated.
Officials at the Federal Reserve, the Office of the
Comptroller of the Currency and the Federal Deposit Insurance
Corp have yet to finalize rules that would implement the capital
accord in the United States.
In addition to the Basel rules, regulators are still working
through dozens of new requirements called for by the Dodd-Frank
law, including controversial actions such as the Volcker rule.
The Senate did show support for cracking down on the biggest
banks last month, approving a non-binding measure introduced by
Brown and Vitter.
That measure called for eliminating the so-called subsidy
big banks receive in the form of cheaper borrowing because
financial markets believe regulators would bail them out if they
got into trouble.
Brown and Vitter are expected to introduce the final version
of their bill in the coming weeks. The Senate returns next week
from a two-week recess.