Thomas M. Hoenig, FDIC Director, made a speech to the American Banker Regulatory Symposium in Washington, D.C. Director Hoenig addressed: (1) the evolution of the Basel proposal; (2) capital, the safety net and markets; (3) an alternative to Basel; (4) whether a simple measure with a relatively stronger minimum capital level would reduce liquidity in the market, constrain loan growth and undermine the economy.
Director Hoenig recommends delaying implementation and revisiting the Basel proposal. Absent that, Hoenig believes that the U.S. should not implement Basel III, but reject the Basel approach to capital and go back to the basics. By doing this, the U.S. can focus on efforts that will create a well-managed, well-capitalized, well-regulated financial system that actually supports economic growth.
Lofchie Comment: This speech echoes, to a good extent, a recent speech by Bank of England Governor Haldane, also criticizing complexity in financial regulation, with some particular focus on the Basel Regulations. I wonder if Basel can be implemented if two such prominent banking regulators are raising such significant criticisms.
View speech in full here (links externally to FDIC website).