Posts Tagged ‘Capital’

Basel III: Is More Capital The Solution?

Tuesday, September 25th, 2012

Basel III, a global regulatory standard being applied to all financial institutions, is scheduled to roll out its first phase in 2015. The regulation has sparked much heated conversation amongst industry leaders since it sets one capital standard for institutions of all sizes and complexities. In my latest Forbes post, I discussed Why “One Size Fits All” Capital Rules Will Not Prevent Bank Failures, and will ultimately affect the small business owner. Implementing increased capital requirements and higher capital costs across the board will result in unintended consequences. What would be most beneficial is regulation with varying standards based on complexity and risk in order to develop a level playing field. You can also watch my thoughts on Basel III & Capital standards in my latest interview on Bloomberg TV’s “Bottom Line” below.

Why More Bank Capital Won’t Cure All The Economy’s Ills

Wednesday, December 14th, 2011

Since the advent of the economic crisis, banks have been forced to increase capital ratios. In my recent blog post on Forbes.com, I discuss why this may not be the solution for the banking industry, and may actually cause more harm than good. You can click here to read the post, or click on the image below. As always, I look forward to hearing your thoughts.

Mark-to-Market….”Bayonetting the Wounded”

Friday, August 14th, 2009

The Accounting Board’s discussion of a return to Mark-to-Market for banks and financial institutions has the potential to be a disaster to the economic health of our country. Trying to value Level Three Assets such as loans would cause wild swings in the capital base of banks on a quarter by quarter basis. In rising interest rate environments, as we are certain to experience in the near future, bank’s capital would be wiped out even though their loan portfolios are performing… Community Banks which typically have high loan to deposit ratios, and where the majority of their balance sheet contain portfolio loans, would suffer disproportionately from banks that retain no interest in the loans underwritten. Lending would cease in times of irrational or illiquid markets, as would capital investment. Without investment in banking, lending would certainly dry up and the economy would move into a deflationary environment…

FASB needs to carefully consider these issues, and be aware that even the discussion of a move toward Mark-to-Market could cause significant harm to the financial industry, and its ability to raise capital…

Click here to watch my discussion with CNBC’s Larry Kudlow on this topic.