Prudential Regulation and Its Effect on the Capital Markets
With the adoption of complex, conservative, prudential regulatory requirements, banks are now subject to multiple risk-based capital ratios, leverage ratios, capital buffers and Total Loss-Absorbing Capital (TLAC) ratios. As a result, they hold excessive levels of capital and liquidity that are increasingly disconnected from the level of risk they incur. Although these levels have undoubtedly increased resiliency, they come at a cost: the more capital required, the less deployed into the economy.Here, Joseph Seidel, SIFMA’s Chief Operating Officer, and Carter McDowell, SIFMA’s Associate…
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