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FDIC's Hoenig: Scrap Basel III and Start Over

Posted on 9/17/2012

The Basel Committee should delay implementation of the Basel III capital accord and rethink it, FDIC Director Thomas Hoenig said Friday at the American Banker's Regulatory Symposium in Washington, D.C. Absent that, the U.S. should abandon the Basel approach and develop a simpler alternative, Hoenig said.

"In private discussions I find a good deal of uneasiness about Basel III's ability to be more effective than previous Basel efforts; however, there is a sense that we cannot go back," he said. "I suggest that we not only can go back, we must."

Hoenig said Basel III is a complex continuation of a system that is fundamentally flawed. He said a better alternative measure would be a tangible equity to tangible assets ratio, which he described as "a simpler but fundamentally stronger measure [that] reflects in clear terms the losses that a bank can absorb before it fails and regardless of how risks shift."

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