Prudential Regulation and Its Effect on the Capital Markets

With the adoption of complex, conservative, prudential regulatory requirements, banks are now subject to multiple risk-based capital ratios, leverage ratios, capital buffers and Total Loss-Absorbing Capital (TLAC) ratios. As a result, they hold excessive levels of capital and liquidity that are increasingly disconnected from the level of risk they incur. Although these levels have undoubtedly increased resiliency, they come at a cost: the more capital required, the less deployed into the economy.Here, Joseph Seidel, SIFMA’s Chief Operating Officer, and Carter McDowell, SIFMA’s Associate General Counsel and Managing Director, talk through the state of the post-crisis prudential regulatory framework and its effects on the capital markets, including market liquidity, capital formation and innovation. To learn more visit: www.sifma.org/prudential