WASHINGTON May 15 Limits on how much banks can
borrow may need to be tougher, a top U.S. banking official said
on Wednesday, the latest in a growing group of regulators to
call for big banks to set aside more equity to fund their
Martin Gruenberg, chairman of the Federal Deposit Insurance
Corp, said that while the global bank capital accord known as
Basel III largely focuses on the level of risk in banks' assets,
the 2007-09 financial crisis has shown it may be necessary to
lift the ratio of how much equity capital banks must hold
compared to their total assets.
"There may be reason to look at ways to strengthen the
leverage ratio as well," Gruenberg said.
During the 2007-09 crisis, many large banks needed costly
Bank regulators have not finalized the U.S. version of the
Basel rules, which determine the amount of capital banks must
hold in part by considering the riskiness of their assets.
But as regulators appear to be nearing the end of their work
on the rules, a growing group of top officials has hinted that
the final requirements could involve boosting the leverage ratio
for some institutions.
Several regulators, including Federal Reserve Governor
Daniel Tarullo, have said the 3 percent leverage ratio under the
Basel agreement may not be high enough.
Two U.S. senators, Sherrod Brown, an Ohio Democrat, and
David Vitter, a Louisiana Republican, have introduced a bill
that would throw out the risk-based requirements altogether and
set capital ratios for the biggest banks at 15 percent,
something that banks say could force them to carve up their
Regulators also have said they may set minimum requirements
for how much long-term debt banks must raise at the holding
company. Gruenberg said this debt could help facilitate the
resolution of a massive, failed bank because it would be part of
a loss-absorbing cushion.