Lacker says government should be ready to let big banks fail

‘Better Position’

“Higher capital puts these firms in a much better position to absorb future losses,” Bernanke said yesterday at an Atlanta Fed conference in Stone Mountain, Georgia.

Senate Democrats and Republicans are drafting legislation that would require U.S. regulators to replace an international capital accord with even higher standards.

Under Basel III, banks must hold at least 7% of Tier 1 capital against a bank’s risk-weighted assets, plus as much as a 2.5% for some of the world’s largest and most complex banks.

Senators Sherrod Brown, a Democrat from Ohio, and David Vitter, a Republican from Louisiana, intend to introduce a bill this month that would require U.S. regulators to replace Basel III requirements with a higher capital standard: 10% for all banks and an additional 5% for institutions with more than $400 billion in assets.

Bloomberg News

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