Fed paper reignites debate on bank capital ratios

US industry association criticises official analysis suggesting optimal Basel ratios of up to 26%

Differing opinions: despite the strong reaction from The Clearing House, some observers are doubtful the Fed paper will influence policy

A US industry association has reacted strongly to a working paper from the Federal Reserve suggesting optimal Tier 1 capital levels for the banking sector of between 13% and 26% of risk-weighted assets.

“The question on the optimal level of capital in the banking system needs to take into account the post-crisis reforms, which have generally been left out of the Fed analysis,” says Francisco Covas, senior vice-president and deputy head of research at The Clearing House Association, which