One of the first tasks of the Trump Treasury Department should be to abandon the Basel regime of banking regulations. These are rules emanating from the Bank for International Settlements, an institution owned by 63 central banks, including the Fed, and based in Basel, Switzerland. The Basel Accords are recommendations concerning capital requirements and risk measurements.
We’re on the third round, hence the nomenclature Basel III.
U.S. banks overall are more than adequately capitalized. Regulations are stifling bank lending and unnecessarily increasing costs. JPMorgan Chase’s boss, Jamie Dimon, estimates that regulations add as much as 80 basis points to mortgages. That’s almost $300 a month for a typical new mortgage.
Thanks to suffocating regulations, a major decline took place in lending by banks to startups, hindering economic vitality and creativity.
Former FDIC head Bill Isaac accurately sums it up: “The Basel regimes are riddled with complex and dubious models and are expensive, cumbersome and nearly impossible to understand and enforce.”
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