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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (69780)	9/14/2006 12:31:46 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Short Interest globaleconomicanalysis.blogspot.com Mish

To: Ramsey Su who wrote (69780)	9/14/2006 3:52:54 PM
From: YanivBA	Read Replies (1) \| Respond to of 110194

Lawmakers question U.S. bank capital rule By Patrick Rucker news.yahoo.com WASHINGTON (Reuters) - A new capital plan for large U.S. banks is flawed and could give foreign lenders a competitive advantage, lawmakers said on Thursday. The rule, the Basel II accord, was designed as a modern tool for banks to determine how much capital they should hold against possible losses and applies to the largest and most internationally active financial institutions. But U.S. banks have complained loudly that foreign lenders are not under additional constraints being applied under Basel II in the United States and so will be able to turn more reserve capital into cash. "I am not confident that the current proposal is well designed," said Rep. Carolyn Maloney (news, bio, voting record), a Democrat from New York. Many leading U.S. lenders, she said, "are very apprehensive that the new rule will leave them at a significant disadvantage as compared to foreign institutions." Regulators have argued that the refined approach of Basel II is needed in a world full of complicated investment products. And many large banks hoped that such a fine-tuned approach would allow them to free up capital required by regulators to protect against losses, justifying the enormous costs of compliance. But as U.S. regulators and banks have thrashed out details on Basel II, foreign banks have moved closer to implementing the accord, which will have international standing. New conditions from U.S. regulators have large banks questioning the value of Basel II and many have asked for more flexibility. This summer, several large banks and the American Bankers Association requested that banks be able to opt out of a costly and cumbersome method of measuring required capital in favor of a more streamlined approach. Federal Reserve Board Chairman Ben Bernanke has said that he opposes granting such an allowance and that the sophisticated approach envisioned by the draft rule, known as the advanced approach, is required. On Thursday, at a hearing before the House Financial Services Committee, Federal Reserve Governor Susan Bies stood behind Bernanke on the need for the advanced approach. "The advanced approaches of Basel II are much more risk sensitive, cover more areas of potential risk facing banking organizations, and provide incentives for these institutions to improve risk measurement and management," she said. YanivBA: Sure sounds like risk aversion is right around the corner. Still, Bies left open the possibility that regulators might tinker with the Basel II rules. Regulators have received many comments from the industry, she said, "we have taken these comments seriously." Rep. Barney Frank (news, bio, voting record), a Democrat from Massachusetts who is a leading member of the Financial Services Committee, said he was impressed by "the consensus that has emerged among the banks," against the advanced approach and that "the burden of proof" was on regulators to justify their approach to Basel II.