Basel III Capital Requirements Are Too Low and Too Weak

Nov 28 2012 - 9:05pm

Washington DC, November 28, 2012—

“The capital requirements of Basel III are too low and too weak to prevent the next crisis or to prevent more bailouts,” said Dennis Kelleher, President and CEO of Better Markets, in advance of the House hearing on capital standards to be held on Thursday, November 29, 2012.  Better Markets’ Chief Economist, Marc Jarsulic, will testify at the hearing.

“The 2008 financial crisis happened because the too big to fail banks had too much debt and too little equity.  Their highly leveraged positions made them vulnerable to asset price declines and creditor runs.  When the crisis hit, that massive debt and lack of equity caused them to fail or almost fail, which required government bailouts that were, in substance, direct or indirect injections of equity,” Mr. Jarsulic stated in his written testimony.

“Capital requirements are the mechanism to address this key flaw in the funding practices of the too big to fail banks.  If they are set at adequate levels, then the likelihood of another financial crisis is reduced and, most importantly, the need for taxpayer funded or backed bailouts would be reduced even further,” Mr. Jarsulic continued.

View Mr. Jarsulic’s written testimony here

 

About Better Markets

Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts.

###