Feb 25 The capital surcharges under
consideration for the largest "systemically important" banks do
not appear excessive and may in fact be too low, a top U.S.
Federal Reserve official said on Monday in a strong defense of
tough new financial regulations.
Boston Fed President Eric Rosengren, speaking in Seoul,
cited the findings of an internal Fed study on capital buffers
for so-called systemically important financial institutions, or
He argued such firms should face surcharges commensurate
with how successfully a troubled bank would be able to wind
itself down, without harming the broader financial markets or
Regulators globally are still crafting many of the new rules
meant to avoid a repetition of the brutal 2007-2009 financial
crisis. In the United States, where the crisis began, regulators
like the U.S. central bank are still finalizing details around
additional capital surcharges for SIFIs.
The reforms have drawn criticism from Wall Street and
elsewhere that they risk overburdening banks with unnecessary
rules that will only slow the tepid economic recovery from the
recession that the crisis caused.
"Contrary to arguments put forth by some commenters, our
results suggest that even under the current multi-pronged
approach, the current calibration of the SIFI surcharge does not
appear excessive," Rosengren said at a Bank for International
Settlements forum, based on prepared remarks.
The Boston Fed study, which has not yet been fully released,
looked at how 26 SIFIs would have performed through the
financial crisis had they the capital levels that are now
It found that eight such firms would have suffered losses
exceeding the capital buffers required by the international
Basel III standards and that of the U.S. stress tests.
Given this finding, Rosengren said, the "minimum standards
for large institutions may be too low." SIFIs that are difficult
to resolve could receive a higher surcharge than "more easily
resolvable" SIFIs, he added.
Rosengren, who did not comment on monetary policy, said he
backed the "multi-pronged" approach of combining capital
surcharges with liquidity standards, bank resolution plans, and
the stress tests, in order to safeguard financial markets.