Academic

Will Bank Capital Reserve Requirements Be Doubled?

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

The Basel Committee is suggesting, according to Der Speigel, that banks should hold 9% of their assets in cash-like tier 1 capital, way up from the pre-crash 4%.  They'd have to hold more tier 2 capital as well. I find it interesting that it is the European banks who are supposed to be worried about Basel (they are super large, so their worry is probably more on the possibility of a leverage cap, but tier 1 capital is pretty close to that).  Accordingly to The International Economy (not on the web), two thirds of all banking assets are held by European banks.  You'd think the very big would welcome the competition stability that high captial reserves ought to bring.

Full post as published by Conglomerate on September 07, 2010 (boomark / email).