Comerica faced aggressive questioning Tuesday about how it could use freed-up capital now that it’s no longer considered a systemically important financial institution. It won’t be the last small regional to get such a grilling this earnings season.
The chairman of the Federal Reserve is testifying before Congress this week, where he will likely face tough questions about the agency’s decision to let two banks slide on their exams late last month.
Fannie Mae and Freddie Mac may need to tap into U.S. Treasury funds when they adopt CECL, a new accounting rule that makes companies set aside money upfront for expected loan losses.
Economic cycles do turn, eventually. And it is inevitable that the industry will fall victim to a new approach to banking that will fall flat in a downturn.
The regulatory relief legislation rolls back several stress test requirements for regional and midsized banks, putting more onus on financial institutions and their regulators to ensure banks are managing their risk appropriately.
There’s renewed focus on the relative importance that capital and liquidity should play in regulation, but the discussion misses another measure that should rank higher in bank evaluations.
Policymakers should spend more time focused on limiting risky activity through measures like the Volcker Rule than on demanding ever-higher levels of bank capital.
Subordinated debt issuance, which took a back seat as bank stocks surged, could regain popularity as growth-minded banks become leery of market volatility.
