Legislation poses risks for US bank system, says Standard and Poor's

A White House proposal to curb excessive risk-taking by banks has sparked fears it could crimp banks' access to funding, which Standard & Poor's on Tuesday said might cause it to downgrade its U.S. banking system assessment. The biggest fear is that new regulations on risk-taking could expose bank bondholders to a greater chance of losses, which would undermine the attractiveness of bank bonds, said Tanya Azarchs, managing director, financial institutions ratings, with Standard & Poor's in New York. Legislation "could be detrimental to bondholders and could affect the BICRA rating further," Azarchs said on a panel debate at an S&P conference on banking in New York. The BICRA, or banking industry country risk assessment, reflects the chances that a country's banking system may experience a systemic failure, Azarchs said. It is one of several factors S&P considers when determining a country's credit rating.