They were complaining
to the Senate back in October:
"Recent proposals by the regulators, while well-intentioned, have the
potential to reduce the availability of affordable credit [and] adversely
affect competition among banks," said Jim Garnett, a top risk-management
official at Citigroup, at a Senate hearing.
Evidently that didn’t get anywhere, ‘cos they’ve now been reducd to complaining
to the White House:
Citigroup Inc., J.P. Morgan Chase & Co., and two other large U.S. banks
brought concerns about pending international capital standards known as Basel
II to White House officials as crucial deadlines for the standards approach.
The Jan. 4 meeting represents the most recent — and perhaps highest level
— attempt by the group of banks, which include Wachovia Corp. and Washington
Mutual Inc., to bring substantive changes to the Basel II capital proposal
before next year. The Federal Reserve and other bank regulators are still
discussing how to implement the standards by next January.
As if the White House is the optimal place to start getting into ridiculously
complicated and hard-to-follow debates about something (Basel II) which pretty
much nobody understands in full.
reckons that the US regulators are right, and that the US banks are wrong:
By allowing banks to employ use their own models, Basel II encourages the
move towards more arcane, unmanageable transactions, and relatively penalises
conventional old-fashioned banks whose risks are well understood. All financial
institutions should be constrained by a risk management system that is simple,
comprehensible and rigid. The largest Wall Street banks, such as Citi and
JP Morgan, need tighter controls than Basel II provides.
I’m not convinced: either that Basel II is insufficient, or that the extra
capital controls that US regulators want are a good way of redressing any shortcomings
that do exist. But I do stick by what I said
back in November:
If the FDIC had a problem with Basel II, it should have said so at some point
in the 1990s or at latest a few years ago, when things could still be changed.
Now, it’s too late.
Why on earth did the FDIC wait until now to spring this on the US banks which
are set to implement Basel II? I can absolutely see why Citi and JP are upset.
It’s all a function of the ridiculous amount of regulatory overlap in the US:
You can get the Federal Reserve on board, but that doesn’t mean you’ve got the
FDIC. Too many regulators have a habit of spoiling the broth.