Fixed Capital Rules for Banks Not Needed: BNY CEO

The Collins amendment to the financial regulation reform bill, which would require fixed capital ratios for some banks, is unnecessary, Robert Kelly, the CEO and chairman of Bank of New York Mellon, told CNBC Wednesday.

“I’m not sure that’s [the amendment is] productive at this point,” said Kelly, “because the United States Treasury and the Fed are working with a number of countries on the new Basel iii [Basel 3] regulations, in terms of what would be appropriate Tier 1 capital ratios and liquidity ratios for the rest of the world.”

Kelly said it’s important that the United States strike a balance when dealing with other countries. “You’ve got to be careful that we don’t get ahead of the planet and have too much capital.”

“On the other hand, we don’t want to have an unlevel playing field with the rest of the world. We don’t want to operate at a competitive disadvantage— us, say, versus the Europeans or the Asian banks.”

To avoid another Lehman Brothers-type scenario, Kelly added, he’s generally in favor of proposed financial regulations, especially the Resolution Authority, which gives the government power to either shut down too-big-to-fail firms or stave off a contagion effect.

“Mark-to-market loans would probably be one of the dumbest things we could do,” Kelly said in response to a question about proposed practices by the Financial Accounting Standards Board.

Most bank loans are one-offs that are individually negotiated, he said, and such a practice would be “way too pro-cyclical”—with some 8,000 banks nationwide.

“More importantly,” he added, “all banks in the nation in every downturn would be insolvent, and that is the last thing our nation needs now.”