Seg­ment riski­est busi­nesses into hold­ing firms, Wall St bankers urged

New Straits Times - - Business World -

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

Tom Hoenig

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