Comptroller of the Currency Thomas J. Curry asserted that
regulatory reforms since 2008 have improved capital, limited
leverage, enhanced liquidity and improved supervision. In remarks
at the 2016 Annual Robert Glauber Lecture at the Harvard Kennedy
School, he stated that the U.S. "banking system is now as well
capitalized as any in the world."
Mr. Curry emphasized that:
Improving Capital. "The
benefits of a strong banking system built on a strong capital base
should not be forgotten in debates about striking the right balance
in capital standards."
Limiting Leverage. Leverage
ratios should "serve as an additional line of defense, or
backstop, to the risk-based capital measures."
Implementing the Liquidity Coverage Ratio and the proposed Net
Stable Funding Ratio are "steps in the right
"The importance of effective
supervision is perhaps the crisis' greatest lesson"
– supervision is "the regulators' primary means of
affecting behavior and promoting a healthy risk culture."
In the end, the measure of this work is whether the financial
system is now stronger, more resilient, and more capable of
satisfying the financial needs of the United States, and can adapt
to changing consumer demands, market opportunities, and new
technology. I think that answer is "yes."
Mr. Curry cautioned regulators that "now is not the time to
let our guard down" and observed that "[t]hose who have
been in this business for more than one cycle know a downturn will
come," he concluded that "lessons from 2008 were not
really new lessons," after all, but reminders of
Regulators may want to consider tempering these kinds of victory
speeches with a little less self-congratulation and a little more
reflection. Just by the law of averages, not every rule works or is
worthwhile. Regulators may want to allow for the possibility that
the massive regulatory burdens that have been imposed since the
financial crisis may require some reconsideration.
Regulators might ask, for example, why so many community banks
are shutting down at such a rapid rate. Or they might consider
whether the combination of: (i) expensive new regulatory burdens,
(ii) diminution of powers to engage in previously profitable
activities, (iii) the effect of abnormally low interest rates and
interest rate spreads, and (iv) competition from new fintech firms
that create significant new issues for banks of all sizes could
negatively affect a bank's ability to cover its costs and what
that might mean to the economy.
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