The call to increase the leverage ratio of banks to stem risk taking is again fueling debates on whether imposing new increases will scare away investors or limit lending.
As far as the analysts are concerned, the main question now is: how high is too high?
The move of US regulators to craft higher standards for banks is understandable after coming off the heels of one of the largest bailouts the country has ever seen during the 2007/2009 financial crisis. Another mess like that and taxpayers would have their heads.
While analysts believe that banks have no other choice but to comply with the new leverage regulations, there's bound to be some fallout. That means banks might have to limit their exposure to government bonds, cut down on lending, reduce their liquidity buffers or even sell some of their assets to raise capital.
Regulators, meanwhile, offer this alternative: cut back on their incentives and salaries for management and personnel.
Join the Conversation