June 23, 2016
The text of Chairman Shelby’s remarks, as prepared, is below.
“Today, we will continue the Committee’s examination of one of the most critical areas under its jurisdiction: the regulation of the U.S. banking system.
“Recently, we heard from a panel of experts on the appropriateness and effects of capital and liquidity rules.
“Their testimony highlighted the complexity of the current capital and liquidity regime.
“One witness testified that ‘…we have introduced all these very complicated rules that tell bankers how to, in essence, be a banker.’
“We should be able to agree that regulators should regulate banks, not run them.
“Some believe that every one of the new capital and liquidity regulations is needed to guard against the next crisis.
“I worry that such complexity, however, could contribute to the next crisis.
“Regulators continue to reference the last financial crisis as a justification for rule after rule, without establishing a requisite nexus between individual rules and how they will prevent the next crisis.
“This has created a vastly complex regulatory system that could increase systemic risk, while giving a false sense of security that the system is safer than it is.
“For years, I have urged regulators to implement strong capital requirements.
“I believe strong capital is essential for a sound banking system and as a safeguard against taxpayer bailouts.
“Many, however, have questioned whether recent capital and liquidity rules will actually work during the next crisis.
“For example, will they ensure that liquidity is available when it is needed?
“Or, will they jeopardize the financial standing of an otherwise healthy bank?
“In addition, no regulator has engaged in a rigorous economic analysis to identify the effect of regulations on funding and liquidity when a crisis strikes.
“On one hand, regulators stress-test banks annually to determine whether the banks can withstand adverse economic scenarios.
“But, on the other hand, they are unwilling to stress-test their own capital and liquidity rules to see whether those rules will result in more or less liquidity should a crisis occur.
“We simply do not know if these rules are tailored appropriately to both prevent and handle the next financial crisis.
“The purpose of today’s hearing is to receive testimony from industry representatives. We’ve asked them to discuss the current capital and liquidity regime and the effects it may have on the banking industry, financial stability and the ability to stimulate economic growth.”
Shelby Opening Statement at Hearing on Bank Capital and Liquidity Regulation
WASHINGTON, DC – Thursday, June 23, 2016 – U.S. Senator Richard Shelby (R-Ala.), Chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs, today delivered the following opening statement during a full committee hearing entitled, “Bank Capital and Liquidity Regulation Part II: Industry Perspectives.”The text of Chairman Shelby’s remarks, as prepared, is below.
“Today, we will continue the Committee’s examination of one of the most critical areas under its jurisdiction: the regulation of the U.S. banking system.
“Recently, we heard from a panel of experts on the appropriateness and effects of capital and liquidity rules.
“Their testimony highlighted the complexity of the current capital and liquidity regime.
“One witness testified that ‘…we have introduced all these very complicated rules that tell bankers how to, in essence, be a banker.’
“We should be able to agree that regulators should regulate banks, not run them.
“Some believe that every one of the new capital and liquidity regulations is needed to guard against the next crisis.
“I worry that such complexity, however, could contribute to the next crisis.
“Regulators continue to reference the last financial crisis as a justification for rule after rule, without establishing a requisite nexus between individual rules and how they will prevent the next crisis.
“This has created a vastly complex regulatory system that could increase systemic risk, while giving a false sense of security that the system is safer than it is.
“For years, I have urged regulators to implement strong capital requirements.
“I believe strong capital is essential for a sound banking system and as a safeguard against taxpayer bailouts.
“Many, however, have questioned whether recent capital and liquidity rules will actually work during the next crisis.
“For example, will they ensure that liquidity is available when it is needed?
“Or, will they jeopardize the financial standing of an otherwise healthy bank?
“In addition, no regulator has engaged in a rigorous economic analysis to identify the effect of regulations on funding and liquidity when a crisis strikes.
“On one hand, regulators stress-test banks annually to determine whether the banks can withstand adverse economic scenarios.
“But, on the other hand, they are unwilling to stress-test their own capital and liquidity rules to see whether those rules will result in more or less liquidity should a crisis occur.
“We simply do not know if these rules are tailored appropriately to both prevent and handle the next financial crisis.
“The purpose of today’s hearing is to receive testimony from industry representatives. We’ve asked them to discuss the current capital and liquidity regime and the effects it may have on the banking industry, financial stability and the ability to stimulate economic growth.”
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