TLDR:
- US banks are criticizing regulators for imposing stricter capital rules since the financial crisis, arguing that it limits their ability to provide credit to businesses and households.
- The Federal Reserve’s vice-chair for supervision has hit back at these criticisms, stating that the rules have improved the safety and soundness of the financial system and have not had a negative impact on lending.
The US banking industry has been critical of regulators for imposing stricter capital rules since the financial crisis, arguing that these rules limit their ability to provide credit to businesses and households. However, the Federal Reserve’s vice-chair for supervision, Lael Brainard, has hit back at these criticisms, defending the rules and arguing that they have improved the safety and soundness of the financial system.
In a speech at the Peterson Institute for International Economics, Brainard highlighted the key features of the capital rules and their impact on banks. She noted that the capital rules have required banks to hold more and higher-quality capital, reducing the chances of failure and the potential negative impact on the broader economy.
Brainard also emphasized that the rules have not hampered lending. She cited data that showed that bank lending to businesses and households has grown steadily since the implementation of the capital rules. She argued that this growth demonstrates that the rules have not had a negative impact on the availability of credit.
Furthermore, Brainard highlighted the benefits of the capital rules for smaller banks. She noted that the rules have provided these institutions with more certainty and reduced their regulatory burden. She also emphasized the need for consistent capital rules across different types of banks in order to maintain a level playing field.
Brainard acknowledged the concerns of banks over the complexity of the capital rules and the potential unintended consequences. She stated that the Federal Reserve is committed to addressing these concerns and is working on simplifications and clarifications to make the rules more effective and easier to understand.
In conclusion, Brainard defended the stricter capital rules imposed on US banks, stating that they have improved the safety and soundness of the financial system without impeding lending. She emphasized the need for consistent and simplified rules to ensure a level playing field and reduce regulatory burden on smaller banks.
