Banking’s new era of capital puts watchdogs on the spot

THE 16th anniversary of the collapse of Lehman Brothers has been marked by regulators signalling that the era of toughening up capital rules is over. The strength of banks and standards of safety have been significantly bolstered since 2008.

From now on, what matters is that supervision is well-funded and rigorous so that none of this is undermined or chipped away in the years ahead. Be warned: the pressures of competition in finance and myriad other calls on government funds make this no certainty. 

Last week, the Federal Reserve’s top rulemaker, Michael Barr, watered down the US’ proposed version of the global Basel 3 standards, slashing demands for extra capital at the biggest banks by half. His climbdown followed a bruising backlash from industry and Congress over the past year.