Systemic Risk Council
January 23, 2013
Dear Chairman Bernanke, Chairman Gruenberg and Comptroller Curry:
The Systemic Risk Council (SRC) is concerned by the recent decisions to weaken and delay global capital and liquidity standards under the Basel III accords.
As you know, risk-absorbing capital, particularly when combined with stable liquidity, plays an essential role in protecting the financial system from inevitable shocks and substantially reduces the likelihood that these shocks turn into financial crises. Excessive leverage, combined with an over-reliance on unstable, short term funding were leading causes of the near collapse of our financial system in 2008.
While we recognize the need for regulators to make minor adjustments to timetables, it is essential to have higher capital standards in place as soon as possible, and to avoid any further weakening of the liquidity standards. The SRC continues to call on financial regulators to prioritize implementing Basel III for the large, internationally active banks, while at the same time strengthening the Basel III leverage ratio by raising it to 8 percent.
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