Editorial Board
New Bank Capital Plan Takes the Wrong Approach
Regulators shouldn’t try to micromanage balance sheets. Better to set simpler leverage limits and leave the risk decisions to bankers.
A risk worth taking.
Photographer: Ken James/Bloomberg
For months, the biggest US banks have been looking for ways to defeat a proposed rule that would set stricter limits on their leverage.
Some of their arguments are misleading, such as the notion that bank capital is cash that is “set aside” and can’t be used for lending, or the view that US banks are already overcapitalized. But others have merit and demonstrate a key flaw in the regulators’ approach.