Saturday, September 25, 2010

Geithner: U.S. banks are well-positioned

WASHINGTON - Treasury Secretary Timothy Geithner said Wednesday that U.S. banks are in a good position to meet new global capital standards because of the stress tests conducted in the United States last year.

In testimony to the House Financial Services Committee, Geithner praised the new global rules on capital adopted at a meeting earlier this month in Basel, Switzerland.

He said that stress tests conducted in spring 2009 in the U.S. forced banks to raise needed capital, the cushion that banks have to hold against losses.

Because of those tests, Geithner said U.S. banks are in a strong position internationally and will be able to meet the new requirements.

Geithner said that most banks will be able to increase their capital cushions through their projected future earnings.

That means that they will not have to cut back on their lending as they build up their capital reserves.

The new capital standards, Geithner said, "will significantly lower the probability and severity of future financial crises and it will help protect taxpayers by limited excessive risk-taking by financial institutions."

The so-called Basel III rules will gradually require banks to keep more capital on hand to absorb potential losses.

Some critics have voiced concerns that the standards may be raised so high that they will limit the amount of money banks will have available to make loans.

The rules were adopted earlier this month by banking regulators, including Federal Reserve Chairman Ben Bernanke, from major countries.

Geithner said they will be reviewed by leaders of the Group of 20 major countries at their November summit in South Korea.

Geithner told the panel the administration will be pushing to get the G-20 leaders to endorse the measures so that implementation can begin. The United States has the authority to impose the tougher capital standards through provisions in the sweeping financial regulatory law that was approved this summer.

Another key part of that legislation was creation of a new Consumer Financial Protection Bureau.

Last week, Obama selected Harvard law professor Elizabeth Warren to serve as a special adviser to help set up the new agency.

In that job, she will not require Senate confirmation, bypassing a potentially confirmation fight.

by Martin Crutsinger Associated Press Sept. 23, 2010 12:00 AM

Geithner: U.S. banks are well-positioned

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