FDIC’S Bair calls for higher bank capital

By Maria Aspan and Dave Clarke

NEW YORK (Reuters) – A top U.S. bank regulator pushed back on Thursday against complaints from large banks about the amount of capital they will be required to hold.

Federal Deposit Insurance Corp Chairman Sheila Bair said new capital standards should be high and should take effect quickly.

“Full speed ahead and the higher the better,” she said at an event hosted by the Council on Foreign Relations.

Bair will step down from her post in July. In the waning days of her chairmanship, she has been warning the industry against trying to water down regulators’ attempts to better supervise it in the wake of the 2007-2009 financial crisis.

Regulators argue that the higher capital standards will help make the financial system more stable, but banks are complaining that such requirements would restrict their ability to lend.

The amount of capital U.S. banks will have to hold is moving on two separate but related fronts, and proposals are expected to be released this summer.

The Dodd-Frank financial oversight law requires the Federal Reserve to draw up enhanced capital standards for banks with more than $50 billion in assets and other financial institutions regulators determine are important enough to the smooth functioning of the financial system that they need increased supervision.

International regulators, as part of what are known as the Basel III talks, are also negotiating over how much additional capital large international banks should hold.

Basel participants have already agreed that at a minimum banks should hold top-quality capital equal to 7 percent of their risk-bearing assets.

Negotiators are now focusing on how much above that level large, internationally active banks will have to hold.

Many analysts believe international regulators will settle on requiring these banks to hold an additional 3 percent in capital. (Reporting by Maria Aspan in New York and Dave Clarke in Washington; Editing by Lisa Von Ahn)