“Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig continued his drumbeat in support of stronger capital measures Tuesday and rejected industry claims that a rigorous leverage ratio breeds unintended consequences.
“Both Hoenig and Jeremiah Norton, another FDIC board member, have recently intensified calls for a tougher leverage ratio than what would be required in the Basel III proposal.
“Under the Basel accord, the largest financial institutions would face an additional 3% minimum leverage ratio on top of the minimum 4% leverage ratio for all banks.
“In a speech to the International Association of Deposit Insurers in Basel, Switzerland, Hoenig said that is not enough. He reiterated his view that a tangible leverage ratio, which measures a bank’s capital to assets without risk-weighting and intangibles like goodwill, is generally a better measure of a bank’s capital buffer than the risk weight-laden Tier 1 ratio that is central to the Basel proposal.”
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