| WASHINGTON, April 24
WASHINGTON, April 24 Legislation to force U.S.
banks to drastically raise their capital buffers - a proposal
that has been criticized as a veiled attempt to break up the
biggest banks - was presented in a slightly weakened form by two
senators on Wednesday.
The two, Sherrod Brown, an Ohio Democrat, and David Vitter,
a Louisiana Republican, want to ditch a global accord on capital
standards known as Basel III and put more straightforward caps
on how much banks can borrow.
The bill, which adds to a rising chorus of big-bank critics
in Washington even if it stands little chance of getting
adopted, requires banks with more than $500 billion in assets to
have at least 15 percent of shareholder equity.
In a draft proposal, Brown and Vitter had set a minimum
capital ratio of 10 percent for all banks, but the final text of
the bill lowered that to 8 percent for those banks with more
than $50 billion in assets.
Bank regulators could set the capital ratio for banks that
were even smaller, the bill said.
"This is a bank break-up proposal," said Tony Fratto, who
works at consulting firm Hamilton Place Strategies. "Mandating
new and punitive capital charges, and walking away from
international agreements ... is misguided."
The debate about whether Washington has done enough to stave
off the risk of a taxpayer bailout of Wall Street has heated up
in recent weeks, with politicians and even some regulators
calling to do more to prevent the next crisis.
Basel III calls on banks to hold up to 13 percent of
capital, but that level is determined based on the riskiness of
assets, making it far less demanding than the Brown-Vitter
Many lawmakers, banks and regulators have also criticized
the Basel approach as too complicated.
There is little chance of political consensus on any plan to
carve up banks such as JPMorgan Chase, Citigroup
or Bank of America, though another major mishap at one
of these banks might change that.
The Senate last month approved a largely symbolic measure to
eliminate a "subsidy" banks receive in the form of cheaper
borrowing, because markets assume that governments will always
bail them out if they land in trouble.
Small banks grouped together in the Independent Community
Bankers of America (ICBA) welcomed the law, which also provides
relief for small banks from a range of other rules that have
been written after the financial crisis.
Representative Jeb Hensarling - a Texas Republican who
chairs the influential House Financial Services Committee -
equally promised small banks relief from the increasing
regulatory burden at an ICBA conference on Wednesday.
Democrats and Republicans in the committee were negotiating
about a "bipartisan regulatory relief bill", Hensarling said. He
declined to say what would be in the bill.