Hypo Venture Capital Headlines: Bank capital fight spills into U.S. Congress

http://hypoventure-capital.com/2011/06/hypo-venture-capital-headlines-bank-capital-fight-spills-into-u-s-congress/

The fight by big banks against higher capital standards came to the Congress on Thursday where Republicans held a hearing to air Wall Street concerns about regulation and its impact on profits.

Little more than two years since taxpayer bailouts were needed to firm up banks’ flimsy balance sheets, governments on both sides of the Atlantic are moving to force the banks to hold more capital and be better prepared for future crises.

Banks are resisting, however, and remarks made at a U.S. House of Representatives hearing showed they have support among many Republicans and some Democrats, with the 2007-2009 credit crisis growing fainter in the rear-view mirror.

Citing concerns about international competitiveness and the availability of credit in a fragile economy, JPMorgan Chase Chief Risk Officer Barry Zubrow told lawmakers: “The regulatory pendulum clearly has now begun to swing to a point that risks hobbling our financial system and our economic growth.”

Final decisions on new global bank capital standards are still months away. The standards are being developed through the Basel III process being coordinated by the Financial Stability Board, an international body based in Switzerland.

The United States is committed to full implementation of the Basel III accords, once they are finalized, both “at home and abroad,” U.S. Treasury Undersecretary for International Affairs Lael Brainard told the House Financial Services Committee.

She added that it was important to make sure that capital rules be internationally consistent.

Similarly, Federal Reserve Governor Daniel Tarullo said the Fed is seeking alignment of the Basel III capital rules with those imposed in the United States under last year’s Dodd-Frank financial oversight law.

At a minimum, under the Basel pact, banks will have to hold top-quality capital equal to 7 percent of their risk-bearing assets. Analysts expect the largest financial institutions to have to hold additional capital of about 3 percent.

Financial industry officials also complained at the hearing that new derivatives rules under Dodd-Frank will put U.S. firms at a disadvantage because other countries have yet to implement their own strict standards.