The Bankwatch

Tracking the consumer evolution of financial services

“I begin with capital. We have a clear imperative to reform capital requirements” | Geithner

Its a tall order but Geithner is aiming high.  His targets align quite well with Germanys Merkel and it will be interesting to see how that plays out this week in London. 

‘Robust and stable’ system is goal of US  | FT

It was good for regulators to think more about system rather than institution- specific risks. But he said: “I am sceptical about the ability of central banks and regulators to provide early warnings of crises. We need to build a system that is safe against uncertainty, against ignorance, against the failure to identify the future source of crisis.”

The key is to return to some degree of certainty in banking.  His focus is the right focus for banks to return to some type of certainty.

“I begin with capital. We have a clear imperative to reform capital requirements. I think the basic cushions in the system – capital, liquidity, reserves – were too thin and procyclical in their effects.”

Mr Geithner favours what some call a “systemic risk surcharge” – tougher requirements for the most systemically important companies. The “crucial test of a financial system” is its ability to withstand failure. “That requires core institutions to hold more capital against risk. It also means market infrastructure in all these markets – in derivative markets, in securities lending, in the repo market – has to be able to absorb failure and contagion.”

Written by Colin Henderson

March 31, 2009 at 00:47

Posted in Uncategorized

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