As regulators were getting close to an international agreement on how much additional capital large banks that are deemed too big to fail should hold. In 2010, international policy makers met in Basil and agreed to 7 percent. The Dodd-Frank law passed in that same year in the U.S. meant that the Federal Reserve Bank would have to “impose tougher capital standards on ‘systemically important financial institutions’.”[1] Hence, American officials wanted “to coordinate with global regulators so that U.S. firms aren’t put at a disadvantage.”[2] Not wanting to divert more capital to protect themselves from losses, banks were busy lobbying the regulators to reject the proposed 2.0 to 2.5 percentage points above the 7 percent set at Basil.
The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.
1. Deborah Solomon and Victoria McGrane, “Lenders Dig in on Rules,” The Wall Street Journal, June 16, 2011.
1. Deborah Solomon and Victoria McGrane, “Lenders Dig in on Rules,” The Wall Street Journal, June 16, 2011.
2. Ibid.