March, 02, 2010

The regulator of the largest U.S. banks said policymakers should not impose steep new capital requirements too soon, which could choke off lending just as the economy is beginning to recover.Comptroller of the Currency John Dugan said on Monday that there was a "real tension" between putting critical capital and liquidity reforms in place, and ensuring that institutions are extending credit.

"None of us wants to take precipitous action on new capital rules or liquidity requirements that might lead to an abrupt reduction of credit to creditworthy borrowers," Dugan said in prepared remarks at a conference for the Institute of International Bankers.However, he said his preference was to focus more on long-term reforms, while still being cognizant of short-term credit."If we are going to err, I believe we should err on the side of safety and soundness," Dugan said.

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