By Nicole D. Prysby, J.D.
Representatives Maxine Waters (D-Calif) and Ed Perlmutter (D-Colo) sent a letter to the Federal Reserve Board urging it to maintain strong capital requirements for global systemically important banks (G-SIBS). The letter, also signed by 17 additional Democrats, urges the Fed not to forget the costly lessons of the financial crisis and to maintain appropriately tough capital requirements on G-SIBs.
The letter was sent in response to a letter from Republican Members of Congress expressing concerns that G-SIBs face "unwarranted capital burdens" and urging the Fed to reduce the G-SIB capital surcharge. According to the Democrats the G-SIB capital surcharge levels the playing field for community banks, as it only applies to eight of the largest banks (with a combined $10.7 trillion in assets).
In addition, the letter states that the higher capital standards have not harmed U.S. banks, which have made record profits—an average of $167 billion annually the last three years and $60 billion in the second quarter of 2018. The Democrats state that U.S. banks have increased lending to businesses by 80 percent since 2010 and are also competing well internationally.
The letter also points out that Federal Reserve Board Governor Lael Brainard, the Federal Deposit Insurance Corporation, and community banks have all spoken out in opposition to reducing the capital requirements for G-SIBs.
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