Comptroller of the Currency Thomas Curry said last week that regulators should re-examine Basel III’s proposed leverage ratio that FDIC officials have said is too low.
“We are still working on Basel, and I am hopeful that we will soon have in place a final rule that will ensure that our banks—and our large institutions in particular—have enough high-quality capital in place to better reflect the risks these institutions pose,” Curry said.
Early last month, FDIC Vice Chairman Thomas M. Hoenig said the three percent leverage ratio under Basel III is not high enough to reduce the risk of a taxpayer-funded bailout in the event of financial failure.
“It is wrong to suggest to the public that, with so little capital, these largest firms could survive without public support should they encounter any significant economic reversals,” Hoenig said.
Federal Reserve Board Governor Daniel Tarullo also said during a speech this month at the Peterson Institute for International Economics that the leverage ratio had been set too low.
Basel III rules will apply to all banks and bank holding companies. The National Credit Union Administration, however, has yet to incorporate Basel III into its capital rules for credit unions.
The National Association of Federal Credit Unions told warned both the NCUA and the Fed that the rules would not be appropriate for credit unions.
“The proposed Basel III requirements and the Federal Credit Union Act’s statutory framework on capital, leverage ratio, liquidity and other matters are simply incompatible,” NAFCU said in a letter to the Fed.