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Hsu spices up bank capital rules with politicized comments.

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* Michael Hsu of the Office of the Comptroller of the Currency highlights a connection between banks’ capital requirements and their dividend and share buyback policies

* Hsu’s statements are criticized for unnecessarily politicizing the issue

* The argument over stricter capital rules for large US banks continues

Last week, Michael Hsu, acting director of the Office of the Comptroller of the Currency, made comments connecting capital requirements for banks to their dividend and share buyback policies. Critics argue that Hsu’s statements were unnecessary and needlessly politicized the issue at hand. Supporters of Hsu argue that he is promoting the idea that increasing share buybacks hurts the real economy, an indication of how political he is making the issue. The argument over whether large US banks need more stringent capital rules continues, with concerns being voiced by multiple federal banking regulators. However, the regulatory capital framework itself is seen as highly flawed, as no weight is given to people’s ability to manage their own safety. Federal regulators have a significant amount of discretion in setting banks’ capital rules, indicating a need to reduce regulators’ discretion and implement a more market-based approach.

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