Lenders Losing Battle of “Basel”

The US Federal Reserve may have little choice but to follow Europe’s lead and require US banks to add more capitalization. US banks had argued that guidelines need not be so strict, report Victoria McGrane and Dan Fitzpatrick for the Wall Street Journal. Banks described as “too big to fail,” ones that pose risk to the global financial system, are the target. “Basel regulators last month designated 29 so-called systemically important firms – including eight in the U.S. – but didn't say just how much capital each bank would be required to carry,” notes the article. “[G]lobal regulators are applying more weight to banks that handle large amounts of short-term lending and borrowing with other financial institutions and maintain large debt- and equity-underwriting practices.” Meanwhile hedge funds and other nonbank financial entities could pose just as much danger, but so far are escaping similar scrutiny and regulations. – YaleGlobal