A significant feature of HR 10, now in the US Senate, is realignment of capital reserves. The act, supporters say, will increase the requirements without putting small banks at a disadvantage, reducing regulations at the same time.
The requirements are based on the quantity of capital assets and not the risk associated with the use of those assets. Really, then, as many critics point out, HR 10 does not actually align with the probable risk.
Again, look at the “intendency” of the legislative measure known as “The Financial Choice Act.” TBTF banks are free to choose what the probable risk is despite whatever the reserve requirements are.
It appears that HR 10 is a measure designed to protect the public from risk. Most people do not actively control the risk, however, but can actively participate in the detriment, systemically derived.
Increasing capital reserves does not reduce who encounters the detriment; and if you are managing the risk, you certainly do not “intend” for it to be you!
(See other articles by griffithlighton on “the intendency” and proprietary management of risk dimension.)