FDIC head Sheila Bair, who has emerged as one of the most powerful regulators after Obama’s financial reform bill was passed, says she won't hesitate to break up banks if they don't have a “living will” that could be put in effect should that bank fail.
“We have the authority now to differentiate between creditors of the same class,” Bair told the Financial Times, adding that the only time her agency has ever used such authority was to maximize value by “keeping the lights on” types of payments to banks’ creditors.
Bair, who is also involved in drafting the new Basel III standards, describes the capital claims of some banks as "disingenuous" and says she thinks that most watchdogs deciding new rules at the Bank for International Settlements wanted banks to hold higher quality capital and significantly more of it.
“I think there are a few that are perhaps succumbing somewhat to industry arguments that if we raise capital requirements, we’re going to stifle the recovery and they’re going to cut back on lending,” she says.
She also that the new standards required by the financial overhaul legislation could be phased in over time but that “five years is probably the maximum.”
Macro-regulation proposal under the new Basel III bank rules could force Australian banks to set aside as much as an additional 2 percent of capital during rapid credit growth, The International Business Times reports.
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