Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, September 3, 2009

Treasury Releases Principles for Reforming Regulatory Capital Framework for Banks

The Treasury Department posted on its website a policy statement, "Principles for Reforming the U.S. and International Regulatory Capital Framework for Banking Firms."  According to the statement,

The global regulatory framework failed to prevent the build-up of risk in the financial system in the years leading up to the recent crisis.  Major financial institutions around the world had reserves and capital buffers that were too low; used excessive amounts of leverage to finance their operations; and relied too much on unstable, short-term funding sources.  The resulting distress, failures, and government bailouts of these firms imposed unacceptable costs on individuals and businesses around the world.  Going forward, global banking firms must be made subject to stronger regulatory capital and liquidity standards that are as uniform as possible across countries.  Today the Treasury Department set forth the core principles that should guide reform of the international regulatory capital and liquidity framework to better protect the safety and soundness of individual banking firms and the stability of the global financial system and economy.

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