{"id":6182,"date":"2012-11-14T22:57:01","date_gmt":"2012-11-15T03:57:01","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=6182"},"modified":"2012-11-14T22:57:01","modified_gmt":"2012-11-15T03:57:01","slug":"back-to-basics-a-better-alternative-to-basel-capital-rules-thomas-m-hoenig","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/14\/back-to-basics-a-better-alternative-to-basel-capital-rules-thomas-m-hoenig\/","title":{"rendered":"Back to Basics: A Better Alternative to Basel Capital Rules &#124; Thomas M. Hoenig"},"content":{"rendered":"<p>FDIC Director Thomas Hoenig calls for a simple capital ratio of Tangible Equity\/Tangible Assets instead of the complex measures proposed by Basel III. Using Tier 1 capital measured according to Basel III standards overstates tangible equity capital by about 40 percent and using risk-weighted assets makes capital adequacy ratios even more subjective.<\/p>\n<blockquote style=\"background-color:#ccccff;\"><p>Prior to the founding of the Federal Reserve System in 1913 and the Federal Deposit Insurance Corporation in 1933, bank equity levels were primarily market driven.  In this period the U.S. banking industry&#8217;s ratio of tangible equity to assets ranged between 13 and 16 percent, regardless of bank size&#8230;&#8230;..<\/p>\n<p>[Basel capital standards] led to a systematic decline in bank capital levels. Between 1999 and 2007, for example, the industry&#8217;s tangible equity to tangible asset ratio declined from 5.2 percent to 3.8 percent, and for the 10 largest banking firms it was only 2.8 percent in 2007. More incredible still is the fact that these 10 largest firms&#8217; total risk-based capital ratio remained relatively high at around 11 percent, achieved by shrinking assets using ever more favorable risk weights to adjust the regulatory balance sheet.<\/p><\/blockquote>\n<p>via <a href=\"http:\/\/www.fdic.gov\/news\/news\/speeches\/chairman\/spsep1412_2.html\">FDIC: Speeches &amp; Testimony &#8211; 9\/14\/2012<\/a>.<\/p>\n<p>Hat tip to Barry Ritholz.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>FDIC Director Thomas Hoenig calls for a simple capital ratio of Tangible Equity\/Tangible Assets instead of the complex measures proposed by Basel III. Using Tier 1 capital measured according to Basel III standards overstates tangible equity capital by about 40 percent and using risk-weighted assets makes capital adequacy ratios even more subjective. Prior to the &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/14\/back-to-basics-a-better-alternative-to-basel-capital-rules-thomas-m-hoenig\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Back to Basics: A Better Alternative to Basel Capital Rules &#124; Thomas M. Hoenig&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[393,590,2091,3326,3416],"class_list":["post-6182","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-basel-iii","tag-capital-ratios","tag-leverage-ratios","tag-tangible-assets","tag-tier-1-capital"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Back to Basics: A Better Alternative to Basel Capital Rules &#124; Thomas M. Hoenig - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Back to Basics: A Better Alternative to Basel Capital Rules &#124; Thomas M. Hoenig - the patient investor\" \/>\n<meta property=\"og:description\" content=\"FDIC Director Thomas Hoenig calls for a simple capital ratio of Tangible Equity\/Tangible Assets instead of the complex measures proposed by Basel III. Using Tier 1 capital measured according to Basel III standards overstates tangible equity capital by about 40 percent and using risk-weighted assets makes capital adequacy ratios even more subjective. Prior to the &hellip; Continue reading &quot;Back to Basics: A Better Alternative to Basel Capital Rules &#124; Thomas M. 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With an average ratio of 11.5% (September 2011),\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8084,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/07\/10\/basel-committee-willing-to-rethink-complex-bank-rules-ft-com\/","url_meta":{"origin":6182,"position":1},"title":"Basel committee willing to rethink complex bank rules | FT.com","author":"ColinTwiggs","date":"July 10, 2013","format":false,"excerpt":"Brooke Masters reports: The Basel Committee on Banking Supervision said in a discussion paper released on Monday that it shares the concern of critics who believe the main measure of bank safety \u2013 the core tier one capital ratio \u2013 is too complicated and makes it difficult to compare banks.\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":10283,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/13\/keep-bank-regulation-as-simple-as-possible-but-no-simpler\/","url_meta":{"origin":6182,"position":2},"title":"Keep bank regulation as simple as possible, but no simpler","author":"ColinTwiggs","date":"July 13, 2014","format":false,"excerpt":"Reading Andrew Bailey's summary of what the Bank of England has learned about bank capital adequacy over the last decade, it strikes me that there are four major issues facing regulators. Firstly, simple capital ratios as applied by Basel I encourage banks to increase the average risk-weighting of their assets\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5803,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/23\/financial-ecosystems-can-be-vulnerable-too-ft-com\/","url_meta":{"origin":6182,"position":3},"title":"Financial ecosystems can be vulnerable too &#8211; FT.com","author":"Colin Twiggs","date":"October 23, 2012","format":false,"excerpt":"By Robert May [Andy Haldane, Financial Stability Director of the Bank of England] argues that complexity may obscure more than it illuminates. He illustrates this by comparing predictions about the chances of failure for a sample of 100 global banks in 2006, based on simple leverage ratios (assets\/equity) with the\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8096,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/07\/11\/us-banks-face-tougher-capital-requirements\/","url_meta":{"origin":6182,"position":4},"title":"US banks face tougher capital requirements","author":"ColinTwiggs","date":"July 11, 2013","format":false,"excerpt":"Yalman Onaran and Jesse Hamilton at Bloomberg report on a new joint proposal by the Federal Deposit Insurance Corp., Federal Reserve and Office of the Comptroller of the Currency: The biggest U.S. banks, after years of building equity, may continue hoarding profits instead of boosting dividends as they face stricter\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6318,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/12\/02\/imf-australias-banks-need-more-capital\/","url_meta":{"origin":6182,"position":5},"title":"IMF: Australia&#039;s banks need more capital","author":"Colin Twiggs","date":"December 2, 2012","format":false,"excerpt":"The IMF identifies risks to Australia's banking system: Residential mortgages are banks\u2019 single largest asset, and a combination of high household debt and elevated house prices increases the risk in this portfolio. Banks rely on funding from outside the country, and with the crisis in Europe and the global economy\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6182","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=6182"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6182\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=6182"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=6182"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=6182"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}