Sheila Bair: Banks Still Need More Capital as They are Still Too Levered

“While 29 out of 30 big banks passed the Federal Reserve’s annual stress test, former FDIC chair Sheila Bair says banks still have plenty of work to do.

The country’s largest banks “are still too levered,” she told Yahoo before the stress test results were released.

“Capital levels have improved since prior to the [financial] crisis, but loan-loss reserves are down significantly as banks keep releasing reserves to drive earnings. They’ll tell you ‘credit quality is getting better, the economy is on the upswing.’ I don’t know about that.”

Banks need more capital and should stop releasing reserves, said Bair, now a director at Banco Santander.

She also expressed concern about off-balance sheet assets at banks with big trading operations, which would include JPMorgan Chase and Goldman Sachs….”

Full article