The Federal Reserve’s other problem
The proposal by US regulators to loosen banks’ equity requirements has ‘financial crisis risk’ written all over it
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THE US Federal Reserve is much in the news currently, as White House pressure for lower interest rates calls the Fed’s independence into question.
But lurking just behind the headlines is another serious issue: the regulation of banks.
The Fed and other prudential regulators are proposing to reduce significantly the biggest US financial institutions’ capital requirements. This would be a dangerous move, and the CFA Institute Systemic Risk Council (an independent body comprised of former US and European officials, with whom we work closely) argues that this proposal should be withdrawn.
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