Bank capital requirements are likely going to head much higher than many expect in the years ahead, says Gerry McCaughey, CEO of CIBC.
Speaking at an industry conference in Toronto on Wednesday, McCaughey suggested that recent regulatory efforts to bolster banks’ capital positions through reforms known as Basel III — which require banks to hold more and higher-quality capital, along with limits on leverage and liquidity requirements — are just the beginning of a global push for tighter capital rules.
“I think that people are underestimating, globally, how far the regulators are going to go over time, in terms of the requirements,” McCaughey said.
He warned that the idea that systemically important banks would just face a small capital surcharge is “excessively optimistic”, and suggested that, instead, there will be continued upward pressure on capital requirements in the years to come due to a variety of macro forces.
“I think that we are just getting started in this process,” he said, “and that it will go much farther than people think.”