Some of the largest U.S. banks are lobbying against a proposed rule to increase the capital they hold against potential losses that would put them at a disadvantage against non-U.S. banks facing easier requirements.
The leverage ratio, proposed by banking regulators at 5 percent for holding companies and 6 percent for their banking unit, targets banks with the most assets.
“I’ve continued to advocate for much higher leverage ratios,” Sheila Bair, former chairwoman of the Federal Deposit Insurance Corp., said in a speech at the 2013 Association for Financial Professionals Conference at the Mandalay Bay Convention Center.
Bair said she thinks the leverage ratio should be 8 percent.
“Eight percent is really the right level,” Bair said. “Where did I get 8 percent? Because mainly the banks that stayed functioning … followed a traditional model and kept lending during the crisis. They were already at 8 percent or higher.”
Bair said banks that “had more capital … did a better job of lending.” Bair, a senior adviser at the Pew Charitable Trusts, told several hundred attendees that as financial professionals they should want “relationships with banks that not only help you in good times, but also help you in bad times.”
She said the stricter leverage ratios were still being fought by some of the nation’s largest banks. Among the financial institutions affected by the higher ratios are JPMorgan Chase &Co., Bank of America Corp., Citigroup Inc. and Wells Fargo &Co.
The July proposal is intended to be a backstop to the Basel III risk-based capital rules already set by U.S. regulators, including the Federal Reserve and the FDIC.
Bair, who served as chairwoman of the FDIC from June 2006 to July 2011, presided over a crucial period in U.S. economic history. During the 2008-09 financial crisis, Bair and the FDIC faced a constant struggle with the media over whether they were running out of money.
Bair said she recently returned from a conference in Malaysia sponsored by its securities commission, where she met with Prime Minister Najib Razak. She said Razak and others were anxious about what’s going on in the U.S.
“They were quite appalled at the spectacle (in Washington) and the cavalier attitude about whether to raise the debt limit,” Bair said. “I can’t tell you how I think that has hurt the reputation of our country.”
She said it was up to Congress to do its job, and “come up with an agreement.”
The AFP Annual Conference was held Oct. 27 to Oct 30. Topics of discussion during work sessions included the effect of rising interest rates, managing banking relationships, managing individual careers in finance and the importance of scenario planning for the future.
Other speakers included Gen. Colin Powell and Mark Zandi, chief economist and co-founder of Moody’s Economy.com.
The conference exhibit hall featured more than 250 vendors — Deutsche Bank, Fitch Ratings, Bank of Ireland, BNP Paribas, Barclays PLC and SunTrust.
Like every convention that takes place in Las Vegas, every booth gives away logo merchandise or offers attendees a chance to win an iPad by simply dropping a business card into a plastic bowl.
Among this year’s giveaways were SunTrust briefcases, basketballs from Barclays, logo T-shirts from Bank of America and hats from Eaton Vance Investment Managers. Most of the financial firms in attendance went with a more traditional gift: the ballpoint pen.
Among the more unique offerings were Huntington Bank’s cups of pistachio chocolate crème ice cream, Union Bank’s caricatures and Reval’s models dressed as a Pan Am flight crew to present one attendee with an upgraded flight home.
Contact reporter Chris Sieroty at email@example.com or 702-477-3893. Follow @sierotyfeatures on Twitter.