Columbia’s Tomasz Piskorski argues that raising capital requirements won’t hinder lending activities
- Higher capital requirements on banks’ balance sheets unlikely to hurt lending activities
- Banks’ claims about the impact of raising capital requirements may be overblown
- Balance sheets are not as important to lending activities as they used to be
- Banks are pulling back from consumer-facing loans as non-banking businesses step in
- Higher capital requirements could help protect smaller and mid-sized banks
- Recent academic research suggests that big banks do not currently face significant insolvency risk
A finance professor from Columbia University has challenged banks’ complaints about higher capital requirements, stating that the impact on lending activities may be overblown. Professor Tomasz Piskorski argues that balance sheets are not as crucial to lending as they once were, as banks typically sell loans in the secondary market. Additionally, banks are reducing their involvement in consumer-facing loans, such as mortgages and car loans, as non-banking businesses take over these areas. Piskorski also supports regulators’ view that higher capital requirements could protect smaller and mid-sized banks. Recent research suggests that big banks do not currently face significant insolvency risk. It is expected to take federal regulators months to develop a modified proposal following the end of the comment period on the Basel III endgame.
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Key People: Tomasz Piskorski (Professor in the finance division of Columbia Business School)
Factuality Level: 7
Justification: The article provides information from a Columbia University finance professor who disagrees with claims by banks about the impact of new regulations on lending activities. The professor’s views are supported by an academic paper he co-authored. The article also mentions the comment letter released by the Bank Policy Institute and the American Bankers Association. Overall, the article presents different perspectives and includes some supporting evidence, but it could benefit from more balanced reporting and additional sources.
Noise Level: 7
Justification: The article provides some analysis and insights from a finance professor regarding the impact of higher capital requirements on banks’ lending activities. It also discusses the comments and concerns raised by bankers and regulators. However, the article lacks scientific rigor and intellectual honesty as it does not provide any data or evidence to support the claims made by the professor or the banks. It also dives into unrelated territories by mentioning the failure of Silicon Valley Bank and the approval of proposed capital requirements by the FDIC.
Financial Relevance: Yes
Financial Markets Impacted: The article discusses the impact of higher capital requirements on banks’ lending activities, which could have implications for the banking sector and potentially affect financial markets.
Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article primarily focuses on the potential impact of higher capital requirements on banks’ lending activities and does not mention any extreme events.
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