Segment riskiest businesses into holding firms, Wall St bankers urged
WASHINGTON: Leading Wall Street firms should segment their riskiest businesses into holding companies that better shield taxpayers from a future bailout, said a leading United States bank regulator on Monday.
Tom Hoenig, vicechair of the Federal Deposit Insurance Corporation (FDIC), pitched his idea to bankers attending an industry conference as a more palatable alternative to the regulatory regime, which has existed since the Dodd-Frank financial legislation was enacted after the 2007-2008 financial crisis.
Hoenig said law had proved burdensome for all banks and had given those that were too big to fail a competitive advantage.
Individual holding companies standing behind big bets on companies, infrastructure or other riskier projects would have higher capital requirements than consumer banks under the proposal.
Hoenig, a political independent, has been rumoured to be a contender for vice-chair for supervision at the Federal Reserve Board — a role that writes fineprint in banking rules.
On Monday, Hoenig declined to comment on such speculation.
“I stay away from that one,” he said. “That’s someone else’s choice.”
The proposal would “require large, complex, universal banks to separately capitalise and manage their traditional commercial banking activities”, Hoenig told a conference of the Institute of International Bankers, here. Reuters