The Clearing House Association SVP and Head of Regulatory Affairs Dan McCardell testified before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, on the impact of Dodd-Frank and its heightened regulatory capital requirements.
McCardell reiterated TCH’s strong support for recent U.S. and international regulatory reforms which have substantially increased the quantity and quality of capital that banking institutions are required to hold. He also expressed concerns over Section 171 of Dodd-Frank, known as the Collins Amendment that requires federal banking agencies to set minimum leverage and risk-based capital requirements for banks. McCardell testified that any potential increase in capital required by the operation of the Collins Amendment's Basel I floor would appear to be of little marginal utility in achieving the crucial objectives of protecting the financial system against potential systemic meltdowns of the type faced in the recent crisis. Moreover, it could place U.S. institutions at a competitive disadvantage vis-à-vis their international peers.
McCardell concluded that there was a significant under appreciation of the trade-offs between higher capital levels and the risk of reducing economic and job growth and pushing financial transactions to the shadow banking sector.