Survey shows large firms OK with higher capital reserves for banks, even if it increases their own costs.

A majority of CFOs today appear to have little sympathy for bankers’ concerns over some of the potential reforms, such as requiring higher capital reserves, now being discussed both in Washington and in Basel, Switzerland. That’s where the Basel Committee on Banking Supervision is developing an “international framework for liquidity risk measurement, standards, and monitoring.”

In responding to the proposals, some of which would require banks to hold higher levels of liquid investments, the American Bankers Association said, “The cost of available credit could be expected to increase significantly.” The Association also warned that access to credit could tighten.

However, when it comes to the trade-offs between reining in financing costs versus ensuring stable, reliable sources of funding, more than a few corporate finance chiefs are tipping the scales in favor of stability. A recent survey by Greenwich Associates found strong corporate support for several elements of the financial reforms now under consideration, even though these probably would boost their own costs of capital. Case in point: Nearly two-thirds of large U.S. companies favor higher capital reserve requirements for banks, even if this means tighter access to credit and higher loan costs. “Large U.S. companies see stability in the financial system as a critical goal, and one for which they are willing to pay a price,” says John Colon, Greenwich consultant. However, respondents didn’t indicate just how great an increase in costs they were willing to absorb, he adds.

Nearly half – 45 percent – of survey participants also supported centralized clearing for over-the-counter derivatives; one-fourth were opposed and 31 percent, neutral. The primary concern of companies that were opposed was the impact it could have on their ability to tailor transactions to their needs.

About the same percent also favor reinstating the provisions formerly found in Glass-Steagall, which would separate investment and commercial banking.

On some proposed measures, CFOs’ thinking more closely parallels that of the bankers. For instance, only 30 percent support a provision in the Dodd bill that would create a government entity to act on systemic risks.

Given how views on financial reform diverge, at least in part, between Wall Street and the companies they work with, it would be good to see corporate America get a chance to make its voices heard as debate on the potential changes continues. ###