The revised trading book framework, on average, requires banks to hold around three to four times the old capital requirements. Controlling leverage An additional and – as recent history has demonstrated – critical element to the regulatory capital framework is a backstop to the risk-based capital requirement. I am talking, of course, about the newly introduced leverage ratio.
While some banks and other industry participants have stepped forward to increase the rate of modifications relative to foreclosures, many have not done enough. I would hope that both servicers and ultimate holders of the mortgages will take this occasion not just to correct documentation flaws and to contest who should bear the losses of mortgages gone bad, but to invigorate the modification process.