
FDIC's Bair calls for the creation of a Systemic Risk Council
Bair takes a swipe on regulators past reliance on risk management and diversification benefits to ensure safety of large financial institutions
"A strong case can be made for creating incentives that reduce the size and complexity of financial institutions as being bigger is not necessarily better," said Bair.
Bair questioned the need for firms considered to be too big to fail and called for such larger firms to face additional capital charges, restrictions on leverage and new risk-based premiums as a way to discourage aggressive growth and complexity. She suggested the US Treasury Department, the FDIC, the Federal Reserve Board and the Securities and Exchange Commission (SEC) could be members of a new "systemic risk council" set up to monitor large institutions. Such a "council" of regulators, she said, would be better equipped than a single agency to exercise that oversight, writing rules, setting capital requirements and collecting data on large institutions that pose a potential threat to the system.
A long standing cynic of the Basel II capital regime, Bair also took the opportunity to take a further swipe at the capital framework. "In hindsight, it is now clear that the international regulatory community overestimated the risk mitigation benefits of diversification and risk management when they set minimum regulatory capital requirements for large, complex financial institutions," she said.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Value-at-risk models face neglect due to FRTB uncertainty
Some banks delaying material upgrades until timeline to replace VAR becomes clearer
CRR III hangs in the balance as member states push for changes
Top EU lawmaker rejects calls to water down capital rules, while others see room for manoeuvre
Looming US Basel endgame redraft sparks calls to save IRB
Experts say 20 years of data makes credit risk models more appropriate than standardised approach
Cool heads must guide financial regulation of climate risk
Supervisors can’t simply rely on ‘magical thinking’ of market discipline, says Sergio Scandizzo
Markets worry EU’s reporting simplification will add to burden
Rather than reducing firms’ obligations, market participants fear it could end up increasing requirements
EU banks show basic instinct for credit valuation adjustments
Simpler approach to CVA appeals even to some already using more complex models for counterparty risk
Bank of England wants dynamic Emir for UK clearing houses
Review won’t just photocopy EU legislation, as BoE seeks to make rules simpler and adaptable
Big banks could be sidelined from future rescue deals – FSB
Exacerbation of too-big-to-fail means G-Sibs could already be too large to take extra assets