Better Markets expressed concern about a possible weakening of the leverage ratio requirements applicable to Wall Street’s largest, most dangerous banks.
Earlier this month, Better Markets expressed its strong opposition to weakening tier 1 leverage ratio requirements for the country’s largest banks. The tier 1 leverage ratio determines how much capital banks have available to absorb losses in case of an unexpected shock. It is an important safeguard against another financial system collapse and more taxpayer-funded bailouts. Guaranteeing banks are well-capitalized also ensures that they are able to support small businesses, Main Street families and the real economy by continuing to lend productively.
Dennis Kelleher, president and CEO of Better Markets, said that one of the biggest mistakes financial regulators made in the years before the 2008 financial crash was to join with the industry in promoting deregulation of the financial services industry. The other mistake was to accept virtually any industry claim—no matter how baseless and self-serving.
He adds that the Fed should treat industry calls for weakening capital ratios with suspicion and address any credible risks to Main Street lending or other current constraints on banks serving their customers with targeted and temporary measures, not sweeping deregulation. This is especially true as the country continues to experience widespread and ongoing economic damage caused by the COVID-19 pandemic.
During this time of unprecedented uncertainty about the outlook for the economy and the impact on the financial condition of the banks, the financial rules protecting the financial system, Main Street families and the economy should not be weakened, Kelleher says.
