Matthew C Klein, Columnist

Sorry, Banks, New Capital Rules Are Just the Start

U.S. regulators have made a cautious step towards higher equity capital requirements. Much more should be done.

July 10, 2013 at 4:55 PM UTC

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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How much should banks be allowed to borrow? According to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, the answer is "less." Yesterday, the regulators proposed stricter equity capital standards for banks with at least $700 billion in assets.

Combined with similar new rules set by the Federal Reserve last week, this would be an improvement. But none of the regulators has gone nearly far enough to ensure that banks won't bring us to a financial meltdown like the one that threatened the global economy in 2007 and 2008.