Higher leverage ratio for biggest banks debated
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 csieroty@reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.
Survey: CFOs, treasurers tell Washington to ‘get back to work’
Finance executives overwhelmingly believe that resolving long-term fiscal and deficit issues will be crucial to economic growth. According to a recent survey by the Association for Financial Professionals, executive say it’s crucial that both "sides of the political spectrum" work together to solve these issues.
The survey asked CFOs, corporate treasurers and other senior-level financial professionals about how the current political and economic environment would affect corporate treasury and finance operations. Of the 1,136 responses, 78 percent think a resolution to fiscal and deficit issues must be achieved before sustained growth will occur.
In addition, 51 percent of executives think economic growth is contingent upon a positive and sustained resolution to the gridlock in Washington and an improvement in the tone of the political debate.
The survey also found the continued inability of the Obama administration and Congress to reach long-term consensus on economic issues has made companies more hesitant to invest for future growth.
"It is time to move on," Jim Katz, AFP’s president and CEO, said in a statement. "Corporations are saying quite clearly that they won’t hire or expand in the U.S. until we find a way to debate in a civilized manner and find the best way to put our house in order."
Forty-four percent of executives also think it’s necessary for economic growth that regulatory complexity and uncertainty is reduced, while 31 percent think a resolution to the uncertainty around the implementation and future of the Affordable Care Act is needed, and 25 percent cited the need for a reduction in corporate tax rates.
Meanwhile, the majority of finance experts expect the Federal Reserve to begin to taper its accommodative monetary policies next year, but more than half of those surveyed do not expect the taper to begin until the second half of 2014 or in 2015.
— Chris Sieroty
