Regulation Redo: Tiered regulation based on banks' complexity rather than their size would free financial institutions to serve the needs of their communities while preserving the safety of the financial system, M&T Bank Chairman and Chief Executive Robert Wilmers writes in a three-part op-ed excerpted and adapted from his annual letter to shareholders. He also said it would strengthen the economic recovery.
Readers responded warmly to Wilmers' rallying cry and had several reform suggestions of their own. "I think your argument supports reinstatement of Glass-Steagall although you don't say so explicitly," writes "TxTim," arguing that this would help simplify and stabilize big banks' business models. "Artofgolf" recommends that banks stay away from derivatives entirely, building off Wilmers' point that the instruments "have long bred complexity and confusion."
Building Better Stress Tests: The Federal Reserve should stop making banks play the stress-test guessing game and inform them in advance about the tests' capital requirements and scenarios, according to Jon Hartley, co-founder of financial technology firm Real Time Macroeconomics. He suggests the change would save banks money and help the Fed more accurately assess banks' preparedness for economic downturns. Reader Per Kurowski has an additional suggestion: "stress tests, in order to be complete, should not only be about what is on banks' balance sheets because what is not there can equally stress the real economy." Meanwhile, Berkeley Research Group's Ozgur B. Kan says banks need to raise the bar on stress tests and look beyond achieving basic compliance. Stress-testing procedures and tools can help banks make more informed everyday business decisions, he writes-but only if banks embrace them.
Also on the blog: Boston University Center for Finance, Law & Policy professor Cornelius Hurley threw his support behind a House bill that would require banks to accumulate a subsidy reserve proportionate to the financial benefits they receive from being "too big to fail."
U.S. housing policies are stuck in the past, according to law professor A. Mechele Dickerson. She says policymakers should accept the postcrisis reality that ownership of a single-family home is economically infeasible for many people. Instead, she says, the U.S. should start considering alternative financing models that make sense for groups of homeowners.
The Federal Reserve says it wants the private sector to take the lead on building a faster payments system, but Merchant Advisory Group head Mark Horwedel would prefer the central bank to be at the helm.
Apple Pay, PayPal and other digital wallets may be new and glamorous, but Americans will likely hang onto their trusty plastic cards for a while yet, says Paul Underwood of Thames Card Technology.