By Peter Schroeder - 10/17/12 02:18 PM EDT
“This is not complicated finance. If a huge bank wants to provide loans and investments for billions of dollars, then they should be required to keep a certain amount of reserves on hand to absorb any rapid or sudden market turns,” added Vitter.
The letter from the Senate Banking Committee members was sent to head regulators at the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.
In it, they critique the Basel III accord, which requires banks to hold at least 7 percent of their assets in what is known as Tier 1 Capital. Larger banks, or ones deemed vital to the financial system, would be required to hold more.
But the senators said this plan might not go far enough, and could still leave banks vulnerable to extreme shocks.
"As you begin implementing these standards, we urge you to focus on simplifying these rules, with a focus on pure, loss-absorbing capital," they wrote. "This will strengthen mega-banks’ balance sheets, protect taxpayers, reassure investors and reduce the regulatory burden on the community banks that are already better capitalized than Wall Street banks. In this case, simpler really is better."