The 16th anniversary of the collapse of Lehman Brothers - Basel
The 16th anniversary of the collapse of Lehman Brothers has been marked by regulators signaling that the era of toughening up capital rules is over.
Last week, the Federal Reserve’s top rulemaker, Michael Barr, watered down the US’s proposed version of the global Basel 3 standards, slashing demands for extra capital at the biggest banks by half.
His climbdown followed a bruising backlash from industry and Congress over the past year.
There were lots of problems with the Fed’s initial proposal, but Barr’s humbling was unusually harsh. And it may not be over yet. Big banks are likely to push for further changes and have threatened lawsuits if the end result is still tougher than they want.
Most of the heavy lifting of shoring up bank balance sheets was done – and most of the extra capital requirements imposed – in the years immediately after the 2008 crisis. There is no magic number for how much capital banks should have and there will always be voices that demand more.
Unfortunately, there have been signs that supervision is already a weak point in the system.
In the US, the collapse of Silicon Valley Bank in 2023 was first and foremost down to bad management – but the errors of exposure, hedging and leadership were allowed to persist by weak oversight.
Paul J. Davies Bloomberg 17 september 2024
Regulators in US and Europe roll back Basel III reforms
https://englundmacro.blogspot.com/2024/06/regulators-in-us-and-europe-roll-back.html
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