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Statement No. 253For Information Contact:Charles W. Calomiris212-854-8748Richard J. Herring215-898-5613George G. Kaufman312-915-7075

On November 5, 2007 the four U.S. bank...

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Statement No. 248For Information Contact:Richard J. Herring215-898-5612Robert E. Litan816-932-1179

After a decade of deliberation and negotiation, the Basel II framework for capital adequacy is...

The use of subordinated debt would be a superior approach in determining appropriate levels of bank capital.

Since 1999, the Basel Committee on Banking Supervision, which consists of the bank supervisors of almost all developed countries, has been struggling to adopt a new capital adequacy framework for commercial banks. The Basel Committee’s bank capital proposal, known as Basel II, has been amended several times and still has...

The Shadow Committee continues to believe that including an appropriate subordinated debt requirement in Tier 1 capital is a superior approach to the measures prescribedby theBasel II Accord.

The Shadow Financial Regulatory Committee applauds the reaffirmation of the importance of numerical thresholds in the leverage-ratio tests and the associatedprompt corrective actiontriggers.

The Dodd-Frank legislation has many problems and omissions, and much is still uncertain about implementation. But the new liquidation authority provides for the possibility of making it so that future crises do not involve the bailouts of creditors that truly embodied the problem of having banks that are too big to fail.

It would be far preferable to replace the complicated Basel capital adequacy framework with a much simpler capital requirement that includes the mandatory issuance of subordinated debt.