Treasury Department Secretary Tim Geithner called Thursday for an agreement on comprehensive new international capital standards for banks by the end of 2010, with implementation by the end of 2012.
In a letter to the Group of 20 finance ministers in advance of weekend meetings, Geithner laid out eight principles to increase capital for all banks. He said even higher standards are necessary for systemically important firms.
"We recognize that stricter capital requirements for banking firms are not without costs … The objective in designing a regulatory capital regime should be to maximize the prospects for financial stability without unduly curtailing credit availability, financial innovation, economic growth or the ability of banking firms to attract private investment," the Treasury Department stated in its principles.
He also called for risk-based capital requirements more tied to relative risk, including systemic risk, and more reflective of a bank's current financial condition.
Though U.S. banks are already subject to a leverage ratio, he called for the creation of a simple, nonrisk-based international leverage ratio and a conservative, explicit liquidity standard.
The secretary said he hopes to reach a consensus among regulators in the United States and globally by the end of 2010.