FDIC Director Trashes Basel, Says Time to Go Back
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FDIC Director Thomas M. Hoenig, speaking at the American Banker Regulator Symposium in Washington D.C. urged international regulators to step back and rethink Basel capital standards and Basel III. Hoenig believes the standards are too complicated and fundamentally flawed.
"[Basel] will delegate the task of compliance to technical experts, and the most brazen and connected banks with the smartest experts will game the system," said Hoening. "In private discussions I find a good deal of uneasiness about Basel III's ability to be more effective than previous Basel efforts; however, there is a sense that we cannot go back. I suggest that we not only can go back, we must."
In the speech, the FDIC directory lists what he sees as flaw after flaw in Basel's approach to governing banks. His solution is to simplify the system.
"We would be wise to acknowledge our limits," continued Heoening, "to simplify the system, to confine the subsidy, and to reduce the taxpayers' exposure to an enormous future liability. It is time for international capital rules to be simple, understandable and enforceable."
"[Basel] will delegate the task of compliance to technical experts, and the most brazen and connected banks with the smartest experts will game the system," said Hoening. "In private discussions I find a good deal of uneasiness about Basel III's ability to be more effective than previous Basel efforts; however, there is a sense that we cannot go back. I suggest that we not only can go back, we must."
In the speech, the FDIC directory lists what he sees as flaw after flaw in Basel's approach to governing banks. His solution is to simplify the system.
"We would be wise to acknowledge our limits," continued Heoening, "to simplify the system, to confine the subsidy, and to reduce the taxpayers' exposure to an enormous future liability. It is time for international capital rules to be simple, understandable and enforceable."
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