Sheila Bair on European Regulatory Capture

Here is Sheila Bair making a stir in a Fortune article released today.

But debt restructuring will get you only so far because Europe’s banks do not have sufficient capital to absorb future losses, which the IMF estimates will be $280 billion or higher. And why are Europe’s banks so thinly capitalized? That responsibility rests squarely with European banks and their regulators.

…since the mid-1990s European banks have continually lowered their estimates of likely losses on their assets and now say their assets are twice as safe as those held by U.S. banks.


The Basel committee needs to move swiftly to adopt standardized measures of risk set by regulators, not banks, and to consistently apply them across all institutions… Bank capital standards should not be an insider’s game. The public deserves better. Bank regulators should do their job, and it is their job, not the job of conflicted bank managers, to set minimum capital levels.

There is no need for me to add my own commentary. Bair’s statements speak for themselves. The full article is linked below.

Source: The Eurozone crisis will not go away until banks face reality – Sheila Bair, Fortune

1 Comment
  1. David Lazarus says

    The Basel Committee have been captured for years. The banks need to have maximum leverage on their equity capital. I prefer the use of equity as it is highlighted in accounts and reserves can be easily manipulated. Though until there is another major crisis i can see the regulators doing what their nations banks want. No country wants to put its banks at a competitive disadvantage as they want to see them grow and expand. They have no idea that they are destroying the rest of the economy.

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