Center for American Progress

The Fed Must Reject Stealth Cut of Bank Capital Requirements
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The Fed Must Reject Stealth Cut of Bank Capital Requirements

Author Gregg Gelzinis explains why reducing bank capital requirements would leave the U.S. economy at greater risk of another crash.

In a recent speech, Federal Reserve Vice Chair for Supervision Randal Quarles again publicly outlined his plan to engineer yet another decrease in the loss-absorbing capacity of the nation’s largest banks. The plan would re-design the countercyclical capital buffer (CCyB) and use misdirection to make it appear as though there would be no impact on bank capital levels. Though Quarles’ desired changes involve the complex machinations of the bank capital framework, the end result is simple. Over time, big banks would have lower loss-absorbing equity cushions—increasing the vulnerability of the financial system and leaving the economy increasingly exposed to the risk of another crash.

The above excerpt was originally published in The FinReg Blog. Click here to view the full article.

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Gregg Gelzinis

Associate Director