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FDIC Regulator Warns Senators: Don’t Lower Bank Capital Standards - ABI

A regulator responsible for the safety of banks has a message to senators: Don't listen to bankers telling you that they need lower capital requirements to increase lending, the Washington Examiner reported today. Despite the push from the industry to lower the standards that were ramped up in the wake of the 2008 financial crisis, big banks actually have too little capital, according to Thomas Hoenig, the vice chairman of the Federal Deposit Insurance Corporation. In a letter sent on Monday to Senate Banking Committee Chairman Mike Crapo (R-Idaho), Hoenig argued that if banks want to increase lending, they could do so without lower capital requirements, by retaining earnings rather than paying dividends to shareholders. The 10 biggest banks could boost lending by $1 trillion annually simply by holding onto more earnings, he said. "I can only caution against relaxing current capital requirements and allowing the largest banks to increase their already highly leveraged positions," Hoenig told Crapo and his Democratic counterpart on the committee, Sen. Sherrod Brown of Ohio in the previously unreported letter. "The real economy has little to gain, and much to lose, by doing so."

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