U.S. Federal Reserve Chair Jerome Powell on Wednesday said it is critical that banks have high levels of capital, but regulators must be mindful of the tradeoffs in ordering large reserves.
Powell told the House Financial Services Committee that the Fed is considering multiple proposals on bank oversight, and struck a balanced tone on new capital requirements, saying healthy cushions are of “central importance,” particularly for the largest global banks.
“We do want banks to be resilient to shocks. We want banks to be able to lend in good and bad times,” he said. “There’s broad agreement…that capital is strong. The question there will be what sorts of increases will be justified.”
Powell said the Fed has a “significant number of proposals in the works” on bank oversight, but none have been finalized or brought to the board for a vote yet.
He also noted that higher capital requirements do come with tradeoffs, and the Fed will have to strike a balance between higher capital and how it could hinder bank lending.