Kevin Brauer, Members United Corporate FCU's executive vice president, member relations, said corporate capital has historically been adequate to weather previous economic cycles. In response to news that NCUA Chairman Michael Fryzel announcement yesterday he will recommend raising minimum corporate capital ratios to 5%, Brauer said "this market crisis has redefined capital adequacy for all sectors of the financial services industry."
"Higher capital levels would provide corporates with greater flexibility to either sell securities at a loss when liquidity is needed, or to hold securities that cannot be sold for a fair value like in today's environment," Brauer said.
He also said Members United agrees with Fryzel's statements yesterday to the House Financial Services subcommittee that corporates shouldn't use rating agencies as their primary risk measure when evaluating securities.
Recommended For You
"While historically reliable, ratings proved inadequate throughout the current credit crisis, providing a false sense of confidence," Brauer said.
The Warrenville, Ill.-based corporate believes future risk management strategies could be improved by obtaining ratings from multiple agencies and assigning greater weight to the lowest rating. However, ratings agencies must first improve their modeling, internal governance and accountability to both investors and regulators, he said.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
