-
Simplification of the Basel capital rules the topic of my first post will get a full airing at the Salzburg Global Seminar's upcoming confab.
August 14 -
International regulators concede capital rules are too complex.
August 12 -
The capital rules are too complicated, making it easy for banks to manipulate them. There's only one way to fix them make them a lot simpler.
August 1
In case you were wondering how that
The debate was conducted under Chatham House rules so no speaker was identified by name, but Seminar editor Louise Hallman
(To see more posts from Barb Rehm's Blog,
The gathering of bankers, regulators, academics and other experts listened last week as two teams debated the pros and cons of both a risk-weighted system and a straight capital-to-assets ratio. Then the floor was opened up and eventually a vote was taken. Leverage lost to risk-weighted by a vote of 19-to-17, which shows just how dissatisfied folks have become with the opaque and inconsistent RWA system. If that same debate and vote had happened a few years ago, RWA would have trounced leverage. Back then everyone had a lot more faith in banks' ability to assess and manage their risks.
My favorite quotes on each side of the debate.
For leverage/anti-RWA:
"Do you want something simple that leaves bankers to do their job? ... Or do you want the regulators to intervene on a daily basis?"
"If a simple leverage ratio makes a good back stop' for banks, why not use it as the front stop'?"
For RWA/anti leverage:
"A simple leverage ratio could force banks out of high volume-low return banking, raising the price of credit."
"Banking is a complicated business Leverage ratio is pursuing simplicity at the price of ignoring the risk. We're oversimplifying a complex thing!"
While this debate is worth having, as I argued in a
