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May 28, 2020

Strengthen Limits on Capital Distributions

Better Markets has called on bank regulators to strengthen, not weaken, limits on capital distributions via dividends and executive bonuses during the unfolding pandemic and economic crisis.

This was in response to a recently issued rule by the Federal Reserve, the OCC, and the FDIC that would make it easier for banks to eject capital by paying shareholder dividends and executive bonuses.

President and CEO Dennis Kelleher says that allowing, much less encouraging, banks to waste capital during a crisis is “not only dumb, but dangerous.”

“The amount of capital a bank has is what enables it to absorb losses and continue lending, which is especially important during an economic downturn like the crisis ravaging the country today,” he says. “Moreover, capital is all that stands between a failing bank and either bankruptcy or a taxpayer bailout. That’s why banks are required to have capital cushions and why capital should be preserved, not wasted or ejected.”

He adds that the interim final rule is the wrong regulatory approach at the wrong time.

“It benefits the wrong people: while Main Street Americans are suffering from the economic catastrophe caused by the pandemic, this capital will be showered on the richest Americans,” Kelleher says.

Read the full comment letter. Better Markets filed a similar but equally important comment letter with the Federal Reserve, objecting to its parallel rule that eases limits on distributions and bonuses under the TLAC or “total loss-absorbing capacity” requirements.

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