Stiglitz urges U.S. to move on hiking bank capital

[Jefferson23]

August 3, 2011

WASHINGTON (MarketWatch) — Nobel Prize-winning economist Joseph Stiglitz on Wednesday said regulators shouldn’t delay in their efforts to raise big bank capital levels, despite concerns that rapid increases could be costly to a fragile economy.

“One should be aware of the large risks, especially under the current circumstances, of delay: it is precisely because the economy is fragile, banks have inadequate capital, and the banking sector in the aftermath of the crisis is more concentrated than before that the risk of a financial catastrophe of the kind that we experienced in 2008 is so great today,” Stiglitz told a Senate Banking Committee at a hearing on financial institutions.


Economist Joseph Stiglitz speaks during the World Business Forum in New York October 6, 2010. “The downside risks of not doing something are especially grave now. It may be desirable, or even necessary, for the government to provide funds for another round of equity injections, if the private sector cannot raise the necessary funds.”

Stiglitz’s comments come as global leaders and bankers have sparred over how much capital is necessary for the banks to hold to ensure a crisis like 2008 is not repeated. U.S. and global bank regulators have taken steps to raise bank capital, although with a delayed time frame.

In 2010, international regulators required global banks to hold the strictest form of capital, common equity, of 7% of their assets by 2019, as part of an agreement known as Basel III, named after the city in Switzerland where past agreements have been made.

in full: http://www.marketwatch.com/story/stiglitz-urges-us-to-move-on-hiking-bank-capital-2011-08-03?siteid=rss&rss=1