Speaking in Banking Tongues
By David Reilly
Bank regulators often speak a language all their own, replete with a host of acronyms and jargon describing the nuances of different capital buffers. Even bank stress tests, a seemingly simple term, get dressed up as CCAR, or comprehensive capital analysis and review. And regulators feel free to inject new phrases at will. So it was when the Federal Reserve last week proposed new rules governing assets a bank must keep on hand that it can readily convert into cash should it face a run. These are more stringent than international ones proposed by the Basel Committee on Banking Supervision. But the Fed didn’t want to say it was being tougher or breaking from the international regulatory pack. Instead, it said its proposed rules were “super-equivalent” to others. Marveling at “the wonders of regulatory prose,” Karen Petrou of Federal Financial Analytics wrote in a note late last week: “I’m pretty sure that this means that, if a person is 200 pounds, he is ‘super-equivalent’ to someone weighing in at 150.”