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Fed Gov. Raskin: Regulators Should Implement Capital Rules

Fed Gov RaskinFinancial regulators should move quickly to implement a clear capital framework for financial institutions, particularly for community banks, Federal Reserve Governor Sarah Bloom Raskin said in a recent speech at the Ohio Bankers Day in Columbus.

Banks of all sizes need strong capitalization
Raskin voiced her support for increasing the quality and quantity of capital at American banking organizations, which is the broad aim of the proposed Basel III international capital rules and the capital-related provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The financial crisis made clear that banks of all sizes need strong capital, Raskin noted.

"The issue, of course, is that the framework has not been finalized, and I am concerned that significant, further delays could add to uncertainty and could detract from the maintenance of strong capital levels," she said.

There are valid reasons why capital rules have not been finalized, Raskin pointed out. Notably, rule writers must consider thousands of comment letters on the proposed rules.

We must move on to a broader vision
Important as they are, though, rules that respond to the most recent financial crisis should not be the sole focus of policy makers and rule writers, in Raskin's view. Beyond the postcrisis work, the country needs a positive vision of the kind of financial system to fostered and preserved for the long run. Articulating such a vision will mean answering numerous fundamental questions once the postcrisis work is nearly done, Raskin said.

Those questions include: Is diversity in the size and type of financial institutions critical to the goals of stability and access to credit? Should federal policy encourage mobile payments and mobile banking technologies? How concerned should we be about cyberthreats, and are there features of a financial system that can limit or thwart such threats?

"We have to address these and other questions if we hope to envision a postcrisis financial regulatory system that supports a strong, dynamic, and diverse financial system," the Fed governor explained. "This, to me, is the strongest motivation for moving ahead as expeditiously as possible on implementing statutory requirements and international agreements to raise capital standards so that we can begin lifting our vision beyond a crisis response."

June 25, 2013


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