According to a new report from the Federal Reserve Bank of Cleveland, US banks increased their capital ratios well before the Basel III reforms required them to do so. Research economist Jan-Peter Siedlarek noted that banks preemptively raised their capital ratios rather than waiting for the rules to become binding.
The report highlighted that larger and better-capitalized banks took the lead in increasing their capital ratios before smaller and less-well-capitalized banks. However, on average, banks of all sizes notably boosted their regulatory capital ratios between 2009 and 2012. By 2012, the average tier 1 capital ratios comfortably exceeded the higher requirements set by Basel III, which came into effect in 2015.
Siedlarek stated, "This series of events is consistent with the view that banks increased their capital ratios preemptively rather than waiting until the rules were binding."
The Federal Reserve Bank of Cleveland, as part of the US central bank, plays a crucial role in formulating the nation's monetary policy, supervising banking organizations, and providing services to financial institutions and the US Treasury. The Cleveland Fed's activities support Federal Reserve operations system-wide and contribute to the well-being of communities across the Fourth Federal Reserve District.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
For more information, contact Chuck Soder at chuck.soder@clev.frb.org or 216.672.2798.
