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April 10, 2013

Hoenig Rejects Claims of Leverage Ratio Critics

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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Read full American Banker article here

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