Federal Reserve's Kashkari says US shouldn't ease bank capital rules

[JACKSON HOLE, Wyoming] Federal Reserve Bank of Minneapolis President Neel Kashkari said American banks need substantially higher capital than they have today and that the central bank is closely monitoring risks associated with leveraged lending.

"You can raise capital requirements and you'll still never take the risk to zero," Mr Kashkari says on panel discussion titled "Too Big to Fail: Where Do We Go From Here" at the reserve bank's research and policy conference on Thursday. "That's the only protection we have against all these unknowns, all these different, various scenarios"

"The biggest banks need substantially higher capital. I don't think we've got nearly enough, and the worst part is in Washington today they're walking back the modest changes that have already taken place, so we're literally moving in the wrong direction and we need to go substantially forward."

"Leveraged lending is an example of something that a lot of folks at the Fed are paying attention to: Who, ultimately, are the holders of that paper? We have some transparency, some visibility, but some of it is unclear to us. We didn't realise the extent of the threat of the approaching crisis in early 2008, and it's impossible to know the seriousness of a crisis as it's starting," he said.

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