Compromise on Leverage Ratio Angers Both Sides of Capital Debate
By Donna Borak
A proposal by U.S. regulators to raise the leverage ratio at the biggest bank holding companies and their subsidiaries is already drawing fire from both sides of a raging debate about how high capital requirements must be to ensure no institution poses a systemic risk. On one side are some top regulators, including Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig, who worry the agencies may not ultimately go through with the plan, as well as some lawmakers who say it does not go far enough. On the other are bankers and their representatives who contend the proposal is excessive, forcing the largest institutions to raise billions of dollars in capital and potentially hurting the economy in the process. “It’s a very loud opening salvo,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics. “It will be making a big dent, but it’s part of a broader campaign for a still more stringent leverage ratio requirement for the biggest banks.”