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Sean Campbell

Chief Economist, Head of Policy Research

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Emma Tong

Research Associate, Policy Research

<h3>Introduction</h3>Twelve years ago, international regulators imposed a new capital <a href="https://www.bis.org/publ/bcbs255.pdf">requirement</a> on the world’s largest banks, a group of roughly 30 institutions termed Global Systemically Important Banks, or GSIBs.&nbsp; The capital charge, stated as a percentage of assets, was justified by the concern that distress or failure of a GSIB would cause undue disruption to financial stability and the economy.&nbsp; The amount of the capital requirement is based on a scoring method that serves as a proxy for systemic risk.&nbsp; The Federal Reserve adopted a more stringent, U.S. version of this <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20150720a.htm">requirement</a> a decade ago.In the U.S., eight banks, the Financial Services Forum members, are subject to the GSIB surcharge.&nbsp; A key and longstanding concern with the U.S. GSIB surcharge is that it is measured in nominal terms without adjusting for the overall size of the banking system, financial system, or economy.&nbsp; As a result, as the economy and financial system grow, so too do GSIB surcharges.&nbsp; Since 2016, the average U.S. GSIB surcharge has increased by 0.4 percentage points, which translates to roughly an additional $50 billion in required capital.&nbsp; In this blog we review the research findings from our recent <a href="https://fsforum.com/a/media/gsib_paper_6.2.25.pdf">paper </a>that documents the source of growth in GSIB surcharges since 2016.&nbsp; We find that all growth in aggregate GSIB surcharges can be attributed to growth in the financial system as measured by growth in the supply of safe assets - bank reserves and U.S. Treasuries.&nbsp; Further, we project that absent any change in how the GSIB surcharge is calculated, GSIB surcharges will continue their steady upward trajectory over the next decade.&nbsp; Rising capital requirements that are not driven by actual risks but by the growth in safe and liquid assets will unnecessarily raise the cost of bank borrowing, creating an unnecessary headwind for the economy.&nbsp;<h3>Diagnosing The Problem: Which One of These Is Not Like the Others?</h3>The GSIB surcharge is determined by a regulator-defined measure of systemic risk – the GSIB score – that depends on a lengthy list of bank characteristics such as the size of a bank’s balance sheet and the amount of derivatives and trading activity conducted by a bank.&nbsp;The GSIB score is calculated differently in the U.S. than in other countries.&nbsp; In all countries except the U.S., a bank’s GSIB score is deflated annually by the total size of the global banking system.&nbsp; As a result, if all banks across the globe were to increase their balance sheet by, say 10 percent, the GSIB score for all non-U.S. banks would remain unchanged.&nbsp;This annual deflation is a simple and sensible policy that is akin to deflating the cost of gasoline by the level of inflation to accurately measure the real, inflation-adjusted price of gas over time.&nbsp; If gas prices rise three percent when inflation also rises three percent, nobody claims that we are having another OPEC crisis.&nbsp; Similarly, an increase in the size and scale of some banks matching the broad growth throughout the banking sector and economy does not signal an increase in “systemic risk.”&nbsp; The U.S. GSIB score, however, does not abide by this simple and sensible policy.&nbsp; The U.S. GSIB surcharge rule does not index GSIB scores for the growth of the economy and financial system. In Figure 1, we show a plot of the average score for a U.S. GSIB under our rules and the score that results from applying the rules for non-U.S. GSIBs, from 2016 through 2023.&nbsp; Each score is indexed to 100 in 2016 to ease comparison.<figure class="image image_resized" style="width:79.45%;"><img src="https://fsforum.com/a/media/6.2.25-blog.png"><figcaption>Source: <a href="https://www.bis.org/bcbs/gsib/index.htm">BCBS GSIB Dashboard</a>;&nbsp; FR Y-15</figcaption></figure>As shown in the figure, while the average U.S. GSIB score has steadily increased, especially since 2019, the non-U.S. score has actually declined.&nbsp; The divergence between the two scores is driven by the fact that the non-U.S. score is annually deflated for growth in the financial system while the U.S. score is not.&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;To be clear, as banks grow with the overall economy the dollar amount of capital they are required to maintain rises, but the capital requirement, stated as a percentage of assets, is generally invariant to a bank’s size.&nbsp; Indeed, if this were not the case, sooner or later every bank would have a capital requirement exceeding 100 percent.<h3>The Upside Down: Increasing the Supply of Safe Assets and U.S. GSIB Scores</h3>We have just shown that under global GSIB rules, the scores for U.S. banks would have declined.&nbsp; Instead, our rules have caused U.S. GSIB scores – and capital requirements – to increase significantly.&nbsp; This increase results from the fact that the U.S. regulator has not deflated GSIB scores for growth in the economy and financial system.&nbsp; But an important question remains, what exactly is driving the increase in the economy and financial system that is leading to higher U.S. GSIB scores and surcharges?In our research paper we relate the increase in the size of the financial and banking system to the increase in the supply of safe assets – bank reserves and U.S. Treasuries.&nbsp; Both bank reserves and U.S. Treasury securities are low-risk, liquid assets that support a stable financial system.&nbsp; In Figure 2, we show how the supply of safe assets has evolved since 2016.&nbsp; The figure also presents projections for the supply of safe assets over the next decade that are taken directly from official government projections provided by the Congressional Budget Office (CBO) and the Federal Reserve Bank of New York (FRBNY).<figure class="image image_resized" style="width:98.09%;"><img src="https://fsforum.com/a/media/6.2.25-blog-figure-2.png"><figcaption>Source: FRB Reserves of Depository Institutions; U.S. Department of the Treasury: Federal Debt Held by the Public; FRBNY <a href="https://www.newyorkfed.org/markets/annual_reports.html">Annual Report on Open Market Operations</a>; CBO <a href="https://www.cbo.gov/publication/60870">The Budget and Economic Outlook: 2025 to 2035</a></figcaption></figure>As seen in the figure, both bank reserves and outstanding U.S Treasuries expanded greatly at the onset of the COVID pandemic and has remained elevated since that time.&nbsp; In the case of bank reserves (left axis), the Federal Reserve nearly doubled the level of bank reserves in a single quarter.&nbsp; In the case of U.S. Treasuries (right axis), outstanding U.S. Treasuries expanded by over $3 trillion in a single quarter following the outbreak of COVID.&nbsp; Further still, the rate of U.S. Treasury issuance post-COVID has doubled and the CBO projects that this heightened rate of issuance will persist for the next decade.Increasing the supply of safe assets mechanically increases U.S. GSIB scores because these scores are stated in nominal terms.&nbsp; As the Federal Reserve increases the supply of bank reserves, banks must absorb the additional reserve supply.&nbsp; Likewise, as <a href="https://www.newyorkfed.org/markets/primarydealers">primary dealers</a> of U.S. Treasuries, as the U.S. government increases its issuance of Treasury securities, large banks must absorb some portion of the increased supply.&nbsp; In addition, the supply of safe assets in the economy influences the overall amount of financial activity that naturally increases the nominal amount of activity in the banking sector.&nbsp; At the same time, it is important to underscore that these are nominal amounts that reflect the nominal size of the overall banking system and not any particular bank.&nbsp; The observed increase in U.S. GSIB scores simply reflects a larger overall financial system rather than any increase in systemic risk.&nbsp; Quite paradoxically, increasing the supply of safe assets increases financial system liquidity and stability, but this increase is mechanically recorded by regulators as an increase in “systemic risk.”<h3>Oh the Places We’ll Go……?</h3>Using the empirical link between the supply of safe assets and U.S. GSIB scores that we document in our research paper, we can answer two important questions: 1) what would have happened to U.S. GSIB scores and surcharges had the massive growth in safe assets that began with the onset of COVID never occurred? and 2) where do we expect U.S. GSIB scores and surcharges to go over the next decade given the projected path of safe asset supply?Both of these questions are addressed in Figure 3.&nbsp; In the figure we show: 1) the actual path for U.S. GSIB scores (black line) and surcharges (grey shaded area), 2) the counterfactual U.S. GSIB score (blue line) and surcharge (blue shaded area) that we estimate would have occurred absent the growth in safe assets following 2019, 3) the projected U.S. GSIB score (purple dotted line) and surcharge (purple shaded area) that we estimate will occur over the next decade given CBO and FRBNY projections for the future supply of safe assets.<figure class="image image_resized" style="width:96.02%;"><img src="https://fsforum.com/a/media/6.2.25-blog-figure-3.png"><figcaption>Source: FR Y-15; FRB Reserves of Depository Institutions; U.S. Department of the Treasury: Federal Debt Held by the Public; FRBNY <a href="https://www.newyorkfed.org/markets/annual_reports.html">Annual Report on Open Market Operations</a>; CBO <a href="https://www.cbo.gov/publication/60870">The Budget and Economic Outlook: 2025 to 2035</a></figcaption></figure>The counterfactual results (blue line and shaded area), which are produced using our model, show that without the growth in the supply of safe assets that was largely brought on by the pandemic, the average U.S. GSIB score and surcharge would have remained effectively unchanged over the 2016-2024 period.&nbsp; Accordingly, all growth in GSIB scores and surcharges that have been observed since 2020 has been driven by growth in the supply of safe assets and the overall financial system.&nbsp; This result is striking.&nbsp; To the extent that any other factors beyond nominal growth in the financial system influence GSIB scores, none of those factors have played any role in the observed and sustained growth in GSIB scores and surcharges since 2016.Further, Figure 3 also shows that past is prologue in the case of GSIB surcharges.&nbsp; Our estimates imply that over the next 10 years, without any change to the GSIB surcharge rule, average GSIB scores will increase by another 100 points and the average surcharge will increase by another 0.5 percentage points.&nbsp; And once again, all of this projected growth is being driven by projected growth in the nominal size of the supply of government debt rather than any increase in systemic risk.&nbsp; Ironically, increasing the supply of safe and liquid assets is leading to higher surcharges that are erroneously linked to “systemic risk.”This projection is highly concerning.&nbsp; <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3676674">Research</a> has shown that GSIB banks reduce their lending in response to increased GSIB surcharges.&nbsp; Accordingly, a continued and sustained increase in GSIB scores and surcharges will only reduce support for the economy.&nbsp; This development would be unwelcome both because it is bad for the economy and because it would be driven by basic, underlying economic and financial growth that is wholly unrelated to any notion of systemic risk.<h3>Conclusion</h3>Since 2015, the Federal Reserve has overseen the implementation of the GSIB capital surcharge in concert with other global regulators.&nbsp; Unlike the rest of the world, however, the Federal Reserve has adopted an approach to systemic risk measurement that ignores underlying growth in the banking system and the broader economy.&nbsp; This deviation has created a widening rift between the U.S. and non-U.S. surcharge methodology that clearly disadvantages U.S. banks and their customers relative to their foreign peers and harms the U.S. economy.&nbsp; Further, left unabated, the troubling trend that has been observed since 2016 will only continue and exact an ever-rising toll on the U.S. economy.&nbsp; The Federal Reserve should act swiftly and decisively to arrest this perpetual growth in large bank capital requirements that is divorced from any sensible notion of systemic risk.&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;

BankNotes Blog

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The Forum supports a review of the GSIB surcharge, a capital requirement that was agreed to internationally, but that U.S. regulators have implemented in a manner that places higher requirements on U.S. banks than that required of foreign competitors. 

Federal regulators have failed to review and adjust the calculation of the surcharge to reflect the inflationary effects of overall economic growth, as they indicated it would when the GSIB surcharge rule was enacted in 2015. Since that time, the surcharges for U.S. GSIBs have increased in large part due to economic growth and inflation, which in no way suggests heightened systemic risk.


GSIB Surcharge 

To Infinity and Beyond? The Supply of Safe Assets and GSIB Capital Surcharges 

In a recent op-ed, Sheila Bair recited a litany of age-old canards about leverage requirements and leverage reform that are as untrue as they are outdated.&nbsp; Below, we address the key misrepresentations that have been made about leverage requirements, risk-blind capital requirements that compare a bank’s equity capital to a measure of its total assets without regard to their riskiness, and discuss why the economy needs leverage reform in the near term.The Facts:<ol><li>Risk-based capital requirements did not cause the financial crisis.&nbsp; The op-ed argues that an overreliance on risk-based capital requirements caused the 2008 financial crisis.&nbsp; According to this worldview, the financial crisis could have been largely averted if only regulators had relied on leverage capital rather than risk-based requirements.&nbsp; This claim does not comport with the basic fact that U.S. banks were subject to a leverage ratio for years before and during the financial crisis.&nbsp; Additionally, and importantly, economic scholars such as Former Federal Reserve Chairman Ben Bernanke who have painstakingly studied the financial crisis have <a href="https://www.brookings.edu/wp-content/uploads/2018/09/Bernanke_final-draft.pdf">shown </a>that the proximate cause was a run in the non-bank sector that was tied to the non-bank funding of mortgages.&nbsp; Importantly, Bear Stearns, Lehman Brothers, Countrywide Mortgage, Fannie Mae, Freddie Mac and the money market mutual fund industry – all non-banks – failed and took a heavy toll on the economy long before a single bank failure occurred.</li><li>Risk-based capital requirements are not “gamed” by banks.&nbsp; The op-ed asserts that a key motivation for simplistic, risk-blind capital requirements is that they are “simple and transparent” and therefore can’t be “gamed” by the banks.&nbsp; This view of risk-based capital requirements has been outmoded by the very significant capital reforms that were enacted post-2008.&nbsp; Specifically, under Basel III, large banks are subject to standardized risk-based capital requirements that assign regulator-specified risk weights to various asset types that are defined and classified by regulators.&nbsp; Further, the stress tests to which all large banks are subject are unilaterally determined by regulators without any bank input.&nbsp; Current risk-based requirements are determined by regulators and are not “gamed” by the banks.</li><li>The leverage ratio is not “neutral” to capital allocation.&nbsp; The op-ed asserts that leverage ratios are “neutral” to capital allocation.&nbsp; This statement is incorrect.&nbsp; Leverage requirements mandate that every asset be funded with the same amount of equity capital.&nbsp; Low-risk assets, such as U.S. Treasuries and bank reserves, provide correspondingly low levels of financial renumeration.&nbsp; But the total cost of funding any bank asset is determined by the amount of equity that is required to fund the asset.&nbsp; Requiring low-risk and low-yielding assets to be funded with the same amount of equity capital as higher yielding assets disincentivizes banks from putting lower yielding assets on their balance sheet.&nbsp; As long as leverage ratios assign the same marginal capital cost to assets with both low and high levels of risk, lower-risk assets will face a steep disadvantage. &nbsp;&nbsp;&nbsp; &nbsp;</li><li>A binding leverage ratio is not evidence that risk-based capital requirements are too low.&nbsp; From a fundamental risk perspective, leverage capital requirements are completely arbitrary.&nbsp; Imagine a different, completely arbitrary, requirement that determines a bank’s capital requirement in terms of the number of letters in its name stated as a percentage.&nbsp; Under this rule, ACME Bank would have a capital requirement of eight percent.&nbsp; If we found that the risk-based capital requirements for ACME Bank were lower than eight percent, would we conclude that the risk-based requirements were too low?&nbsp; Surely not.&nbsp; A capital requirement with no basis in risk cannot, by design, be used to measure the adequacy of a risk-based system.&nbsp; This statement is as true for leverage-based capital requirements as it is for “name-based” capital requirements.&nbsp; Further, large U.S. banks have tripled their capital levels since the financial crisis and have also increased their capital by roughly 20 percent since 2020.&nbsp; Any assertion that a binding leverage ratio points to insufficient risk-based capital requirements is both conceptually flawed and oblivious to the basic facts on large bank capital levels.</li><li>Lowering the cost of issuing Treasuries does not “re-direct capital away from the private sector and into public coffers.”&nbsp; This statement in the op-ed ignores the fact that the borrowing cost for U.S. Treasuries sets the “base rate” that directly impacts the cost of borrowing for every other type of credit.&nbsp; The borrowing cost for auto loans, student loans, home mortgages, business loans and every other form of credit is directly tied to the “risk-free rate” that is required on U.S. Treasuries.&nbsp; Accordingly, improving the market for U.S. Treasuries is a two-fer: it reduces the cost of the U.S. taxpayers’ debt burden and it helps reduce the cost of borrowing for every other form of credit used by businesses and households.&nbsp;&nbsp;</li></ol>Leverage-based capital requirements are fundamentally flawed in a way that disadvantages low-risk assets, distorts capital allocation, and impedes the efficient flow of credit in the U.S. economy.&nbsp; In addition, the U.S. economy and financial system have significantly evolved since the 2008 financial crisis, rendering leverage capital requirements increasingly outdated.&nbsp; Outmoded and arbitrary leverage capital regulations have been backfiring on the U.S. economy for years and are in serious need of reform.&nbsp; Recent commitments by regulators and other officials to reform leverage requirements is a welcome development that we should all embrace to improve our banking system and the economy.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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Increases in capital requirements would harm American households, businesses, and the broader economy. Regulators must carefully consider the economic impact of higher capital requirements, because they affect the whole economy, not just banks.

Capital, other topics

Correcting the Record on Leverage Reform: Leverage Requirements are Already Backfiring

<h3>Introduction</h3>Nearly four years ago, the Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210319a.htm">committed</a> to reconsider the supplementary leverage ratio (SLR) in light of the massive, COVID-driven expansion of the Federal Reserve’s balance sheet.&nbsp; Today, the Federal Reserve’s balance sheet still stands at nearly double its pre-expansion level, but no action has been taken to reform the SLR.&nbsp; Accordingly, there is an urgent need to reconsider the SLR in short order.&nbsp; The current level of the Federal Reserve’s balance sheet, coupled with the existing SLR regulation, results in an unnecessarily binding, risk-blind, capital constraint that is having significant deleterious impacts on financial markets and the economy. &nbsp;In the remainder of this post, we discuss the problems created by risk-blind leverage requirements that have been identified through rigorous academic research.<h3>The Backdrop</h3>The SLR was introduced as a capital requirement for large banks in 2018.&nbsp; The SLR is a risk-blind capital requirement that mandates all large banks to maintain five percent capital against all bank assets irrespective of their risk.&nbsp; Importantly, low-yielding and default-free U.S. Treasury securities and bank reserves issued by the Federal Reserve, the most liquid and risk-free asset in the world economy, must be backed by five percent capital.&nbsp; At the same time, higher-yielding assets such as corporate loans or corporate bonds also require five percent capital under the SLR.&nbsp; In a world in which all assets have the same capital cost, there is a clear and unavoidable incentive to hold higher-yielding assets (corporate loans) than lower-yielding ones (U.S. Treasuries).Back in 2018, the size of the Federal Reserve’s balance sheet was roughly $4 trillion.&nbsp; Today, the Federal Reserve’s balance sheet stands at $6.8 trillion.&nbsp; The additional $2.8 trillion in Federal Reserve assets are largely financed by issuing bank reserves.&nbsp; In the aggregate, banks must hold all of the bank reserves issued by the Federal Reserve.&nbsp; Accordingly, when the Federal Reserve increases its balance sheet it necessarily increases the amount of risk-free assets held by banks and these assets are subject to the 5 percent capital requirement of the SLR.Now that the Federal Reserve is so much larger, more banks are adversely impacted by the SLR because they are required to maintain additional capital on all the additional, risk-free, bank reserves.&nbsp; As the amount of capital required by the SLR has risen, the incentives to pull back on low-risk assets such as U.S. Treasury securities have concomitantly increased.Finally, it is important to fully appreciate how the financial system has changed since 2018.&nbsp; Table 1 below, depicts: 1) the level of the Federal Reserve’s balance sheet, 2) the amount of U.S. Treasury debt outstanding, and 3) the annual interest cost of government debt.<figure class="image"><img src="https://fsforum.com/a/media/3.10.25.png"></figure>As shown in Table 1, while the Federal Reserve has expanded its balance sheet, we have seen a nearly identical expansion in debt issued by the federal government as both have increased by roughly 65 percent.&nbsp; Moreover, the amount of money the government is spending to service its debt has grown by much more, 83 percent, owing to both an increase in outstanding debt and the general increase in interest rates that has occurred recently.&nbsp;Indeed, for the first time since records have been kept, the federal government is now spending more on interest payments than on national defense.&nbsp; What’s more, current projections of federal spending suggest that this gap will only widen in the future and that the nation’s interest bill will only become more pressing.&nbsp; As Table 1 makes clear, the financial system in 2025 looks completely different from the one we knew in 2018 when the SLR was introduced.With this backdrop in mind, it is essential that the U.S. government – including the Federal Reserve – do everything in its power to manage the federal debt, contribute to a well-functioning U.S. Treasury market, and minimize the cost of servicing our national debt.&nbsp; Unfortunately, the current stance of the SLR is antithetical to all these goals.&nbsp;&nbsp;&nbsp;<h3>What Does Research Say About Risk-Blind Leverage Requirements and the U.S. Treasury Market?</h3>We have asserted that leverage requirements are impairing the market for U.S. Treasuries and artificially increasing the cost of government debt.&nbsp; What exactly is the basis for these claims?&nbsp; The best way to assess these claims is to simply look at data-based economic research that has studied the impact of the SLR on U.S. Treasuries and financial markets.&nbsp; Luckily, this is a broad and active area of research.&nbsp; Below, we highlight three relatively recent contributions:<ul><li>A 2024 research <a href="https://www.bostonfed.org/publications/research-department-working-paper/2024/the-effect-of-primary-dealer-constraints-on-intermediation-in-the-treasury-market.aspx">paper</a> by economists at the Federal Reserve Bank of Boston found that the SLR had significant negative impacts on the ability of large dealer banks to intermediate the U.S. Treasury market.&nbsp; Specifically, they found that in response to a more restrictive SLR, dealers reduced their Treasury holdings, leading to a reduction in trading, an increase in the cost of buying and selling U.S. Treasuries, and a weaker response to Treasury auctions.&nbsp;</li><li>A 2022 research <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4175429">paper</a> by economists at the Federal Reserve Board found that banks respond to balance sheet shocks by reducing their exposure to U.S. Treasuries, particularly through reductions in repo activity. Importantly, the paper distinguishes the SLR’s impact from other regulatory requirements, such as risk-based capital and liquidity coverage ratio requirements, finding that the SLR uniquely constrains a bank’s ability to intermediate the Treasury market. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li>A 2023 research <a href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1070.pdf?sc_lang=en">paper</a> by economists at the Federal Reserve Bank of New York and others found that when U.S. Treasury dealers face capacity constraints, such as occurs from an increasingly binding SLR, the liquidity of the U.S. Treasury market worsens.&nbsp; In particular, as regulatory constraints become more binding, Treasury markets become more volatile and trading in the U.S. Treasury market becomes more costly.&nbsp;&nbsp;&nbsp;</li></ul>The research above makes clear that the SLR is imposing well-documented and significant costs on U.S. Treasury markets and the broader economy.&nbsp; Indeed, the U.S. Treasury market underpins essentially every other financial asset in the world.&nbsp; Accordingly, problems in the U.S. Treasury market necessarily migrate broadly throughout the rest of the financial system.&nbsp; In particular, any increase in U.S. Treasury yields or other strains will immediately spill over into the market for home mortgages, auto loans, business loans and essentially any other financial product used by households and businesses.&nbsp; For all these reasons, the Federal Reserve should take immediate action to reconsider risk-blind leverage requirements to address clearly documented problems in the U.S. Treasury market.Each of the papers above is notable because they are authored by staff of the Federal Reserve system.&nbsp; One might reasonably wonder why so much of this research emanates from within the system.&nbsp; The answer lies in the fact that each of the research papers uses confidential bank data that only the Federal Reserve can access.&nbsp; There is indeed a deep irony that only the Federal Reserve system is truly able to fully assess the implications of leverage constraints on Treasury markets, yet the Federal Reserve has so far failed to act on the findings of its own researchers.<h3>But Wait…There’s More</h3>Much of the research literature and discussion of leverage requirements revolves around the SLR.&nbsp; Lurking in the shadows lies yet another, often hidden, leverage requirement - the Tier 1 leverage requirement.&nbsp; The Tier 1 leverage requirement (T1L) is the precursor to the SLR; it was in effect for decades before the SLR was introduced and is still in effect today.&nbsp; The T1L requirement is essentially the classic, historical leverage ratio that has been used for over 100 years and was arguably a relevant capital metric 100 years ago – capital divided by total assets.&nbsp; The SLR is “supplementary” in the sense that the SLR includes certain off-balance sheet exposures like derivatives and loan commitments that are not recorded in total assets due to technical accounting rules.&nbsp;One might reasonably ask why the T1L requirement was not “de-commissioned” following the introduction of the SLR.&nbsp; The basic answer simply amounts to the fact that bureaucracies are good at creating new rules and bad at eliminating old, outmoded, and unnecessary rules.&nbsp; Dealing with the SLR without dealing with T1L would be a mistake.&nbsp; Modifying the SLR without dealing with T1L would simply amount to replacing the SLR with T1L as the new risk-blind leverage requirement and we would be back to square one all over again.&nbsp; Accordingly, it is important that T1L be addressed alongside the SLR.<h3>Conclusion</h3>Sample evidence and research, often conducted by Federal Reserve system staff, clearly show that risk-blind leverage requirements have been impairing the market for U.S. Treasuries for some time.&nbsp; The problems in the U.S. Treasury market are all the more pressing due to the steep rise in government interest payments and forecasts for an increase in the amount of government borrowing.&nbsp; The Federal Reserve, and other regulators and policymakers, should act swiftly to address the deleterious consequences of risk-blind leverage requirements on the economy.

Promises Made, Promises Kept? The Urgency of Leverage Ratio Reform

Dear reader,We’re back by popular demand—and just in time for a busy June in Washington. With longer days and growing policy momentum, there’s plenty to cover. In this issue, we highlight Wells Fargo’s new small business initiative, look at how changes to bank rules could help support the U.S. Treasury market and American economy, and share how Forum members are driving innovation, and community growth nationwide.Thanks for keeping up with us.Kevin Fromer, President and CEO, Financial Services Forum<h2>Penny For Your Thoughts</h2>Kimelyn Harris, head of Small Business Growth Philanthropy for Wells Fargo&nbsp;<h3>What is Wells Fargo’s Open for Business Growth program?</h3>This new $20 million Open for Business Growth program is designed to support the growth potential of small businesses in the “missing middle”– those that are in-between most capital solutions. During the pandemic, Wells Fargo created its Open for Business Fund, a $420 million national small business recovery effort. Through this fund, Wells Fargo collaborated with community organizations to benefit roughly 336,000 small businesses and enable them to keep or maintain 461,000 jobs nationwide. Open for Business Growth builds on that momentum and Wells Fargo’s focus on small business growth.<h3>What do small businesses need to be successful?</h3>Access to capital is the number one need we hear from small businesses. Often these businesses need a little bit more than a microloan but are not ready for traditional financing. Open for Business Growth allows our nonprofit grantees to develop products and services and coaching that embrace growth-stage small businesses so they can reach the next level of success.<h3>How will the Open for Business Growth program be deployed? Which cities?</h3>Our first grant recipient, Allies for Community Business, focuses on growing the construction industry around Chicago and helping businesses that have fluctuating revenue flow, like restaurants and retail. &nbsp;With grant funding, Allies for Community Business is deploying creative capital and flexible financing options that give businesses the leap they need to expand. We’re excited to announce grants in additional markets across the U.S. through end of the year.<h3>Can you explain more what you mean by “missing middle” for small businesses?</h3>Across the country, millions of small businesses serve as the backbone of America’s economy. They provide vital services and goods, as well as jobs for local communities. But there’s a “missing middle” of small businesses ready for expansion but not able to find the flexible capital solutions they need to grow. These small businesses are on the brink of expansion, poised to make an even greater impact in creating jobs, increasing services, and strengthening the economy. They need more than a microloan, but are not yet large enough for traditional financing.<h2>Value Add</h2>Supporting Small Businesses Recovering from the L.A. Wildfires&nbsp;&nbsp;<figure class="image image_resized" style="width:52.97%;"><img src="https://s205.q4cdn.com/885744627/files/doc_multimedia/2025/5/1009701913/HOPE_Inside_for_Small_Business-NR_Image810x450.jpg" alt="Wells Fargo Newsroom - Wells Fargo and Operation HOPE Introduce Free Financial Coaching to Small Businesses"></figure>Wells Fargo is working across the bank to support small business growth. Through Beyond Open for Business initiatives, Wells Fargo is expanding support services to include resources, knowledge and networking opportunities for businesses owners, which is also imperative to their growth.&nbsp; In the Greater Los Angeles area, many local businesses are trying to recover from the devastating wildfires. There Wells Fargo is collaborating with Operation HOPE to extend financial coaching services to small business owners at several Wells&nbsp;Fargo branches as part of the Project Restore HOPE Los Angeles initiative. The five-year effort helps those affected by wildfires with immediate and long-term financial recovery by helping them with FEMA applications, SBA loans, insurance claims, working with creditors, building a recovery budget, and much more. Additionally, Wells Fargo donated $2 million to local nonprofits to support ongoing relief efforts for small businesses and individuals.&nbsp;&nbsp;&nbsp;Wells Fargo believes philanthropy can be a catalyst for lasting impact and collaboration as key to moving the needle, listening to what communities need and co-designing with them. Small businesses are an important path to economic opportunity and wealth-building. Our country needs small businesses as a driver of the U.S economy.<h2>Capital Gains</h2>What we’re doing in WashingtonThe Forum continues to advocate for common sense policies that allow our members to best serve their customers and the U.S. economy. Recently, Forum President and CEO Kevin Fromer <a href="https://fsforum.com/news/forum-applauds-house-committee-passage-of-measures-to-improve-bank-supervision">issued</a> a statement after the House Financial Services Committee voted to advance measures to improve bank supervision. “The FIRM Act, the FAIR Exams Act, and the HUMPS Act represent important steps toward a supervisory system that is consistent and transparent,” Fromer said.Additionally, the Forum, along with fellow trade associations, <a href="https://fsforum.com/news/financial-associations-urge-federal-reserve-to-address-potential-uncertainty-caused-by-stress-capital-buffer-proposal-timing">urged</a> the Federal Reserve to take prompt, interim steps to clarify the 2025 stress test cycle to avoid unnecessary uncertainty.Finally, the Forum <a href="https://fsforum.com/news/forum-applauds-senate-committee-approval-of-governor-bowman-for-vice-chair-for-supervision">applauded</a> the Senate Banking Committee’s vote to advance Federal Reserve Governor Michelle Bowman for Federal Reserve Vice Chair for Supervision and urged swift Senate confirmation. “This role is critical to implementing appropriate regulation and effective supervision that promotes economic growth,” Fromer said.<h2>&nbsp;Our Two Cents</h2>Research from the ForumThe following chart shows how changing the Supplementary Leverage Ratio (SLR) could help large banks buy and hold more U.S. Treasuries. The chart compares the current capacity of the Forum members to hold Treasuries and the additional capacity that would be available under a more flexible standard.<figure class="image image_resized" style="width:62.29%;"><img src="https://fsforum.com/a/media/ff-chart-6.5.png"></figure>In the latest edition of the BankNotes Blog, Forum Chief Economist Sean Campbell <a href="https://fsforum.com/news/correcting-the-record-on-leverage-reform-leverage-requirements-are-already-backfiring">addresses</a> key misrepresentations about leverage capital requirements and discusses why the economy needs change. "Outmoded and arbitrary leverage capital regulations have been backfiring on the U.S. economy for years and are in serious need of reform," said Dr. Campbell.<h2>Checking the Balance</h2>Members in the newsBank of America <a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2025/05/bofa-to-open-150-financial-centers-by-2027--investing-over--5-bi.html">announced</a> plans to open over 150 financial centers across 60 markets by the end of 2027, expanding access to banking services nationwide.BNY <a href="https://www.bny.com/corporate/global/en/about-us/newsroom/press-release/bny-expands-digital-asset-platform-with-launch-of-innovative-on-chain-offering.html">expanded</a> its digital asset platform offering&nbsp; with a new data insights product that securely and efficiently deliver both on- and off-chain data across blockchain networks.Citi <a href="https://www.citigroup.com/global/news/perspective/2025/20-years-global-community-day">celebrated</a> the 20th anniversary of Global Community Day, its annual tradition of global volunteerism and community impact.In April, Goldman Sachs 10,000 Small Businesses&nbsp;announced its 1,000th <a href="https://www.goldmansachs.com/pressroom/press-releases/2025/10ksb-announces-thousandth-graduate-in-salt-lake-city-and-launches-new-program-across-utah">graduate&nbsp;</a>in Salt Lake City, as the firm celebrates 25 years in the city. Goldman Sachs 10,000 Small Businesses also opened applications across Utah as part of its $100 million Investment in Rural Communities, an initiative that launched in 2023 and equips rural entrepreneurs with results-oriented training to help grow their businesses and expand access to capital and to personalized support services.&nbsp;JPMorganChase <a href="https://www.jpmorganchase.com/newsroom/press-releases/2025/workplace-public-benefits-commitment-LMI-consumers">committed</a> $14.5 million in philanthropic funding to improve access to&nbsp;workplace and public benefits&nbsp;for low- to moderate-income individuals.Morgan Stanley&nbsp;<a href="https://www.morganstanley.com/articles/supporting-childrens-mental-health?cid=SM_CORP_TWITTER_MorganStanley_20250408&amp;linkId=793617378">celebrated</a>&nbsp;the 5th anniversary of its&nbsp;Alliance for Children’s Mental Health, reaffirming its $50 million commitment to&nbsp;youth mental health solutions by making&nbsp;multi-year grants to nonprofit members and expanding its&nbsp;<a href="https://www.morganstanley.com/press-releases/children-s-mental-health-innovation-awards-2025">Innovation Awards</a>&nbsp;program to include younger leaders.State Street <a href="https://www.statestreet.com/us/en/asset-manager/insights/market-outlook-2025-second-quarter">highlighted</a> key insights into evolving market dynamics and shared its outlook for the second quarter of 2025.&nbsp;&nbsp;Wells Fargo <a href="https://newsroom.wf.com/news-releases/news-details/2025/Wells-Fargo-and-Operation-HOPE-Introduce-Free-Financial-Coaching-to-Small-Businesses/default.aspx">partnered</a> with Operation HOPE to expand access to financial education workshops and personalized coaching for small business owners.&nbsp;

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The Forum File, 2025 Edition #1

Dear reader,Welcome to the latest edition of The Forum File. In this edition, we are highlighting one bank’s work to expand affordable homeownership opportunities for people in underserved communities.We hope you enjoy reading this edition and please do not hesitate to share your feedback.Kevin Fromer, President and CEO, Financial Services Forum<h2>Penny for Your Thoughts</h2>Abigail Suarez, Head of Community Development, Corporate Responsibility<h3>Describe how JPMorganChase is taking a holistic approach to addressing the housing crisis.</h3>As a firm, we’re committed to expanding economic opportunity and driving inclusive economic growth. When communities thrive, our business does, too. The housing crisis is complex and requires multifaceted solutions, which is why our strategy aims to tackle both housing supply and demand constraints. We are leveraging our philanthropic dollars, business practices, and policy expertise as part of a coordinated, holistic approach to make housing more accessible and affordable. To give a recent example: in an effort to expand homeownership opportunities for underserved communities, we announced a $20 million philanthropic commitment to non-profit organizations working to address this issue, expanded access to a consumer lending product that provides eligible customers with lower interest rates or down payment assistance, and published policy recommendations for <a href="https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/documents/advancing-affordable-sustainable-homeownership.pdf">Advancing Affordable, Sustainable Homeownership</a>. Our combined resources and expertise enable us to deliver impact alongside our local partners.<h3>JPMorganChase recently released a paper on <a href="https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/documents/tackling-persistent-residential-vacancy-blight-and-abandonment.pdf">Tackling Persistent Residential Vacancy, Abandonment, &amp; Disrepair</a>, which outlined place-based strategies to tackle housing supply. How are you implementing these strategies in your own work?</h3>&nbsp;Households across the country are struggling to find affordable places to live, but the solutions to this issue vary depending on the market—in some areas the answer is <a href="https://www.jpmorganchase.com/newsroom/stories/2024-housing-supply-solutions">increasing housing production</a>, while other areas may need strategies to reactivate vacant or abandoned homes as safe places to live. This paper on residential vacancy is part of our What Works series, which shares insights and lessons learned drawn from our experience working with public, private and community partners to drive inclusive economic growth. The paper discusses the importance of&nbsp; building local capacity to address housing affordability challenges, a principle reflected in a $6 million commitment we made in Baltimore to increase affordable homeownership and stabilize housing supply. Our approach is informed by over half a decade of partnership with local city organizations and leaders who are finding innovative approaches to reduce the number of vacant homes in Baltimore. Working in silos is rarely effective, and we’re proud to show up in local communities as listeners and partners to tackle big challenges and catalyze progress.<h3>Another obstacle to homeownership is the problem of heirs property. Why is tackling heirs property important and what is JPMorganChase doing to address it?</h3>Homeownership is a primary means of building and passing wealth across generations—however, the issue of heirs property puts this at risk. Heirs property occurs when a homeowner dies without a will and their property is informally inherited by multiple descendants. Left unaddressed, this unstable homeownership status compromises the ability of residents to pass the property on to descendants and makes them vulnerable to foreclosure or a forced sale. To address this issue, we announced more than $9 million in philanthropic funding to support free legal assistance, estate planning services, and appraisal reform in underserved communities, as well as highlighted support for state and federal policy reforms to address this issue.&nbsp;We also published papers on <a href="https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/documents/supporting-heirs-property-owners-through-natural-disaster-and-resiliency-programs.pdf">Supporting Heirs Property Owners Through Natural Disaster and Resiliency Programs</a> and <a href="https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/documents/addressing-the-undervaluation-of-property.pdf">Solutions to Build Household Wealth by Addressing the Undervaluation of Property</a> to amplify insights and recommendations informed by our business, philanthropic, and policy expertise. By addressing the problem of heirs property, we can help more individuals benefit from the generational wealth-building power of homeownership.<h2>Value Add</h2>JPMorganChase announces plans to expand access to consumer, business and community banking services for customers across Iowa<figure class="image image_resized" style="width:82.6%;"><img src="https://fsforum.com/a/media/chase-heartland.png"></figure>JPMorganChase has committed to open more than <a href="https://media.chase.com/news/chase-makes-multi-billion-dollar-investment-in-its-branch-network">500 new branches, renovate approximately 1,700 locations and hire 3,500 employees across the country over the next three years</a>. This multi-billion dollar commitment will contribute to local economic growth through construction, ongoing community investments and local hiring, bringing opportunity to thousands of local residents.&nbsp;<a href="https://www.cnbc.com/2024/08/05/jpmorgan-chase-opens-more-small-town-branches-in-middle-america.html">As part of this nationwide expansion</a>, CEO Jamie Dimon, senior leaders from across the firm, community partners, employees and elected officials came together in Des Moines to announce the <a href="https://www.jpmorganchase.com/newsroom/press-releases/2024/jpmorganchase-expands-banking-services-in-iowa">expansion of the firm’s services to customers and communities across Iowa</a>. The firm’s Iowa footprint will expand from eight branches to more than 30 across the state by 2030, including new branches in Des Moines, Waterloo, Cedar Rapids, Sioux City, Iowa City and Ames. This commitment&nbsp;is part of the firm’s broader goal to serve 50% of the population in each of the 48 contiguous states within an accessible drive time and builds on 39 years of support for clients and communities in Iowa.<h2>Capital Gains</h2>What we’re doing in WashingtonForum President and CEO Kevin Fromer <a href="https://fsforum.com/news/forum-comments-on-reconsideration-of-capital-regulations">issued</a> a statement following Federal Reserve Vice Chair for Supervision Michael Barr’s remarks on U.S. capital regulations. “We look forward to reviewing the revisions and participating fully in the public comment process. Getting this right is essential for the U.S. economy,” Fromer said.<h2>Our Two Cents</h2>Research from the ForumThe BankNotes Blog Spotlighted:<ul><li>A report from the Government Accountability Office on the banking agencies’ regulatory analysis, which <a href="https://fsforum.com/news/playing-catch-up-on-cost-benefit-analysis-regulators-need-to-up-their-game-on-basel-iii-endgame">emphasizes</a> significant implications for finalizing the Basel III Endgame capital proposal.</li><li>The strong liquidity profile of Forum members and the need for thoughtful and data-based analysis before <a href="https://fsforum.com/news/getting-it-right-before-getting-it-done-large-bank-liquidity-regulation">proposing</a> new liquidity regulations for large banks.</li><li>A proposal by the Federal Reserve and global regulators through the Basel Committee on Banking Supervision to <a href="https://fsforum.com/news/gsib-scores-and-window-dressing-where-is-the-smoking-gun">increase</a> the cost and burden of GSIB score reporting, which is not supported by regulatory data on both GSIBs and non-GSIBs.</li></ul><h2>Checking the Balance</h2>Members in the NewsBank of America <a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2024/07/bofa-celebrates-20-years-of-paid-summer-internship-program---stu.html">celebrated</a> two decades of supporting youth employment and economic opportunity through its signature philanthropic program, Student Leaders. The program has provided 4,500 students with work experience and leadership skills to help build future careers.BNY <a href="https://urldefense.com/v3/__https:/america250.org/news/america250-announces-first-ever-americas-field-trip-awardees/__;!!OiWDNh-9Pw!9ZfEqv9afxrLbGkEk59IdvjAw0JIn1F--1LTM1BDv5vMT2GbGhkwUt2qHWx4cskmLbNY2vmSRZo1KTU$">sponsored</a> America250’s “America’s Field Trip,” a nationwide scholastic contest encouraging students to reflect on what America means to them. The firm helped bring 75 students from 27 states and territories to the nation’s most historical and cultural landmarks including the New York Headquarters of BNY, the country’s oldest bank.Citi’s latest Securities Services Evolution whitepaper focuses on the next frontier for the industry with the growing applicability of technologies, including distributed ledger technology and digital assets, and the significant potential for tokenization. <a href="https://www.linkedin.com/posts/citi_securities-services-evolution-2024-disruption-activity-7236977206336401409-rIAX">Watch an explainer video</a> and read more on these developments that continue to transform the securities landscape <a href="https://www.citibank.com/icg/docs/Citi_Securities_Services_Evolution_2024.pdf?linkId=575991464">in the whitepaper</a>.Goldman Sachs 10,000 Small Businesses <a href="https://urldefense.com/v3/__https:/www.al.com/news/birmingham/2024/09/goldman-sachs-commits-3-million-to-boost-alabamas-small-rural-businesses.html__;!!O2kDR7mm-zSJ!tPfgEVHyVMku67u8Cx4uOF0ywOCofLR2DfFmxS2BzokhfvFOYXgNQH4C-BAS6r0xi7_JESNJCLAQFBSj$">announced</a> an expansion of the program to Alabama, which includes a $3 million commitment to community development financial institutions focused on small businesses, and marks the initiatives fifth launch state to date – on track to meet its goal of reaching 20 states in five years.JPMorganChase <a href="https://www.jpmorganchase.com/newsroom/press-releases/2024/jpmorganchase-unidos-philanthropic-commitment">announced</a> joint policy recommendations and a $6 million commitment to UnidosUS focused on building organization capacity and supporting homebuyer readiness, expanded access to credit, increased housing supply, and the preservation of Latino homeownership.Morgan Stanley celebrated the 2024 graduates of its <a href="https://www.morganstanley.com/about-us/supplier-diversity/small-business-academy1">Small Business Academy</a>, a partnership between its Supplier Diversity Program and the Institute for Inclusion. Through 12 weeks of instructor-facilitated learning and a year-long mentorship program, the Academy enables small businesses to differentiate themselves in the procurement process, strengthen their business acumen and expand their professional networks.State Street <a href="https://newsroom.statestreet.com/press-releases/press-release-details/2024/State-Street-Announces-Issuance-of-1-Billion-of-Senior-Debt/default.aspx">announced</a> an issuance of $1 billion of senior debt, which includes five broker-dealers owned by underrepresented groups who have underwritten 40% of the securities in the issuance.Wells Fargo <a href="https://stories.wf.com/wp-content/uploads/2024/07/Open-for-Business-Fund-Impact-Report-Fact-Sheet.pdf">shared</a> its recent community impact report of the company’s Open for Business Fund, a roughly $420 million national small business recovery effort to help those hardest hit during and after the COVID-19 pandemic. Launched in 2020, grantees report the Open for Business Fund has now benefited more than 336,000 small businesses, empowering them to keep or create more than 461,000 jobs in communities across the nation.

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The Forum File, 2024 Edition #5

Dear reader,Welcome to the latest edition of The Forum File. In this edition, we are highlighting one bank’s work to support underrepresented entrepreneurs.We hope you enjoy reading this edition and please do not hesitate to share your feedback.Kevin Fromer, President and CEO, Financial Services Forum<h2>Penny for Your Thoughts&nbsp;</h2>Selma Bueno is the Global Head of Morgan Stanley’s Inclusive Ventures Group<h3>Tell us about the Morgan Stanley Inclusive Ventures Lab and what makes it unique.</h3>The <a href="https://www.morganstanley.com/about-us/diversity/inclusive-ventures-lab">Morgan Stanley Inclusive Ventures Lab</a> was launched in 2017 to advance a more equitable investment landscape. We run a five-month accelerator program for founders of technology and technology-enabled startups in the seed to Series A funding round stage to develop and scale their businesses. In 2021, we expanded the Lab from North America to Europe, the Middle East and Africa, enabling us to support even more innovation and inclusion globally.&nbsp;What makes our program unique is its holistic approach to supporting portfolio companies. We invest $250,000 in each business, as well as provide a tailored curriculum, mentorship, networking, office space for the duration of the program and access to external advisors.To date, 92 companies, with a combined valuation of $923 million, have been through our accelerator program. The founders have collectively raised over $200 million in additional funding since their participation in the Lab.<h3>How does the Lab’s work align with Morgan Stanley’s Core Values?</h3>At Morgan Stanley, we are guided by five Core Values: do the right thing; put clients first; lead with exceptional ideas; commit to diversity and inclusion; and give back. I am proud to lead an initiative that integrates each of our values.The Lab was created to help shift the investment landscape and level the playing field for underrepresented entrepreneurs because it is the right thing to do, both for the founders we support and for the marketplace as a whole. By spotlighting innovative companies and giving them the platform and network they might need help accessing, we are driving innovation in business broadly.Our Lab’s cohort companies receive the full suite of Morgan Stanley resources and an ecosystem of internal and external partners to provide much-needed investment and guidance – as any client would. In connecting the founders with mentors and with one another, we are building a community in which previously overlooked entrepreneurs can succeed.<h3>Can you tell us how some of the Lab companies are driving inclusivity in the marketplace themselves?</h3>Many of our founders are leveraging their diverse backgrounds and communities’ values to address important gaps in the market and, in turn, advance a more equitable society.Some companies are working to tackle the critical issue of inequity in healthcare, like <a href="https://healthinherhue.com/">Health in Her HUE</a>, which connects Black women and women of color to culturally sensitive healthcare providers and <a href="https://www.gomedhaul.com/">MedHaul</a>, an online marketplace for healthcare providers to book non-emergency medical transportation for patients, based on their special needs.In the education tech space, <a href="https://imagilabs.com/">imagi</a> is using proprietary, inclusive education tools to empower kids to code, increase engagement among girls and help close the gender gap in tech early on.And <a href="https://www.zirtue.com/">Zirtue</a>, a relationship-based lending app that simplifies loans between friends and family, is making it easier than ever for people to access funds by tapping into the power of community support.What all of our cohort companies have in common, regardless of industry or product offering, is the founders’ innate desire to build a better world.&nbsp;<h2>Value Add</h2><figure class="image"><img src="https://fsforum.com/a/media/ivl-founders_crop-(002).jpg"></figure>The Inclusive Ventures Lab Demo Day is our annual showcase where founders can put all they have learned in the accelerator program to the test and raise their profiles with potential investors, business partners and customers.We hosted our ninth Demo Day in February for our largest audience yet of portfolio companies and potential investors. The investment firms in attendance represented over $40 billion of dry powder and indicated a high level of interest in the startups following the event.This latest showcase emphasized both market connectivity, with AI and sustainable solutions as cross-cutting themes, and the sheer range of innovation in our Lab, with companies representing industries such as healthcare, customer service, supply chain, recruiting and cybersecurity.In today’s challenging funding environment, it is incredibly important that we can provide our participating founders with the opportunity to attract capital, expand their networks and bring their game-changing products to scale.<h2>Capital Gains</h2>What we’re doing in Washington<figure class="image image_resized" style="width:79.95%;"><img src="https://fsforum.com/a/media/picture9.jpg"></figure>Forum Chief Economist Sean Campbell <a href="https://fsforum.com/news/icymi-transparency-in-stress-testing-essential-to-achieving-a-more-effective-efficient-and-resilient-financial-system">testified</a> before the House Financial Institutions and Monetary Policy Subcommittee on the need for greater transparency in the stress testing process. “Aligning stress tests with the public process afforded other bank regulatory standards would help improve public trust, promote economic stability, and ensure banks can support the economy to their fullest potential,” Dr. Campbell told lawmakers. Read Dr. Campbell’s full testimony <a href="https://fsforum.com/a/media/forum-dr.-sean-campbell-testifies-on-stress-testing_6.26.24.pdf">here</a> and learn more about stress testing <a href="https://fsforum.com/a/media/stress-testing-for-the-largest-us-banks.pdf">here</a>.&nbsp;Forum President and CEO Kevin Fromer <a href="https://fsforum.com/news/stress-tests-underscore-capital-strength-of-nation-s-largest-banks">issued</a> a statement in response to the Federal Reserve Board’s 2024 stress test results. “The results affirm that the additional capital requirements in the Basel III Endgame proposal are not justified,” Fromer said.The Forum <a href="https://fsforum.com/news/basel-changes-to-capital-surcharge-calculation-unwarranted">submitted</a> a comment letter on the proposed revisions to the methodology for capital surcharges for Global Systemically Important Banks to the Basel Committee on Banking Supervision. “Financial regulations that are not appropriately calibrated result in an inefficient financial system that misallocates capital in a way that can have a detrimental effect on the businesses and households that our member institutions serve, and on the U.S. and global economies as a whole, with no clear corresponding benefit to the resilience of the financial system,” the Forum said.<h2>Our Two Cents&nbsp;</h2>Research from the ForumThe Forum <a href="https://fsforum.com/a/media/forum-value-and-resiliency2024_q1.pdf">released</a> its latest data on the value and strength of the nation’s largest banks.<h2>Checking the Balance</h2>Members in the NewsThe Bank of America Boston Marathon Official Charity Program <a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2024/05/128th-boston-marathon--presented-by-bank-of-america-raises-recor.html">raised</a> $45.7 million, contributing to the marathon’s record total of $71.9 million in charitable funds raised this year. The funds went toward nearly 160 non-profit organizations in the Greater Boston community.BNY <a href="https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fwww.bnymellon.com%2fus%2fen%2fabout-us%2fnewsroom%2fcompany-news%2fthe-bank-of-new-york-mellon-corporation-introduces-updated-brand-bny.html&amp;c=E,1,klT35NUTsdUE8BdfT4UgWK1NuEOweXGzypcGVvsnG3INnu37FDoIoScI-Qc2tEiUAfOJodmwKYFxO1EsM5Re-Xc9fYsphx-mJKI0KwjsK55IQDvc&amp;typo=1">introduced</a> its new brand name and logo. The updated brand marks the firm’s evolution from America’s oldest bank, formerly known as BNY Mellon, to a global financial services leader.Citi Global Perspectives and Solutions <a href="https://www.citigroup.com/global/insights/citigps/ai-in-finance">published</a> a new report on AI &amp; Finance: Bot, Bank &amp; Beyond. The report analyzes the role that artificial intelligence might play in changing the way both consumers and companies bank.Goldman Sachs <a href="https://www.goldmansachs.com/our-firm/history/ipo-anniversary/index.html">commemorated</a> the 25th anniversary of its initial public offering. The firm’s leaders from past and present convened to ring the bell at the New York Stock Exchange.JPMorgan Chase <a href="https://www.jpmorganchase.com/newsroom/press-releases/2024/baltimore-philanthropic-commitment">announced</a> an $8.45 million philanthropic commitment to nonprofit organizations and programs across the city of Baltimore to support economic and community development. The funding addresses residential vacancies to stabilize the affordable housing supply, supports commercial corridor revitalization, and promotes small business growth.Morgan Stanley Foundation <a href="https://www.morganstanley.com/press-releases/morgan-stanley-foundation-8-million-grant-to-feeding-america#:~:text=Morgan%20Stanley%20(NYSE%3A%20MS),among%20children%20and%20underserved%20populations.">announced</a> an $8 million grant over four years to Feeding America to support the establishment or expansion of child and family feeding programs. Since 2009, Morgan Stanley’s funding for Feeding America has totaled more than $50 million, helping to deliver more than 356 million meals to children and families.State Street <a href="https://www.statestreet.com/us/en/asset-owner/insights/2024-markets-and-financing-research-retreat">hosted</a> its 2024 Markets and Financing Research Retreat. In collaboration with academic partners, guest speakers and strategists, the event dissected market trends, inflation, and other proprietary data-driven indicators.Wells Fargo Foundation <a href="https://newsroom.wf.com/English/news-releases/news-release-details/2024/100-Black-Men-of-America-and-Wells-Fargo-Expand-Junior-Investment-Club-with-600000-Grant/default.aspx">granted</a> $600,000 to 100 Black Men of America, a youth mentorship organization. This grant helps expand the organization’s Junior Investment Club, a curriculum-based simulation game that introduces young people to investing.

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The Forum File, 2024 Edition #4 

The Forum File

Contact: Laura Peavey&nbsp;&nbsp;(202) 457-8770&nbsp;lpeavey@fsforum.comForum Applauds Efforts to Improve Functioning of Vital Treasury Markets&nbsp;“Forum appreciates regulators taking the first step to ensure the leverage ratio works for the American economy, not against it.”Washington D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement after federal regulators released a proposal to update leverage capital requirements:“Addressing longstanding issues caused by outdated leverage capital requirements benefits taxpayers and strengthens the U.S. economy. For years, policymakers across the ideological spectrum have raised concerns regarding the negative impact of this requirement on the U.S. Treasury market—which underpins every other financial asset in the world. Through improvements in leverage capital requirements, America’s leading banks will be better able to support market functions that impact Main Street businesses and consumers across the country. While we look forward to fully reviewing the proposal and providing comprehensive feedback, the Forum appreciates regulators taking the first step to ensure the leverage ratio works for the American economy, not against it.”Read our bank leverage capital requirements fact sheet <a href="https://fsforum.com/a/media/leverage-capital-requirements-factsheet.pdf">here</a>. &nbsp;###The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Press Releases

Forum Applauds Efforts to Improve Functioning of Vital Treasury Markets

Financial Associations Recommend Key Changes to Federal Reserve Stress Capital Buffer ProposalWashington D.C. – The Financial Services Forum and American Bankers Association today commented on changes proposed by the Federal Reserve Board (FRB) to reduce volatility in capital requirements caused by the stress capital buffer (SCB) framework. The proposal provides two-year averaging of an institution’s SCB and a new annual effective date—changes that would address year-to-year volatility in capital requirements for banks subject to the stress test regime.&nbsp;“We appreciate the FRB’s efforts to reduce volatility of SCB requirements through the Proposal and welcome it as a useful first step in the FRB’s previewed amendments to the broader stress testing framework,” the associations stated.The associations offered several key recommendations:<ol><li>Effective Date: Implement the revised SCB rule on January 1, 2026, while allowing banks to continue operating under the current framework through September 30, 2026.</li><li>Asymmetric Averaging: Introduce a two-year asymmetric averaging method to ease the impact of rising capital requirements.</li><li>Dividend Add-On: Remove the dividend add-on component, as existing regulations already govern distribution payments.</li></ol>The full letter can be found <a href="https://fsforum.com/a/media/joint-trades-scb-letter.pdf">here</a>. Media Contacts:Laura PeaveyFinancial Services Forum<a href="mailto:lpeavey@fsforum.com">lpeavey@fsforum.com</a>Josh BrittonAmerican Bankers Association<a href="mailto:jbritton@aba.com">jbritton@aba.com</a>About Financial Services ForumThe Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.About American Bankers AssociationThe American Bankers Association is the voice of the nation’s $24.5 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $19.5 trillion in deposits and extend $12.8 trillion in loans.

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Each year, the Federal Reserve tests the ability of large banks to continue to support the economy even in the face of a severe recession far worse than that experienced during the financial crisis.

Multiple hypothetical stress tests, as well as the real-life stress tests of the pandemic and the 2023 regional banking turmoil, have shown that the largest U.S. banks can – and do – act as a bulwark for the economy and the financial sector.

Stress Tests

Financial Associations Recommend Key Changes to Federal Reserve Stress Capital Buffer Proposal

Contact: Laura Peavey&nbsp;&nbsp;(202) 457-8770&nbsp;lpeavey@fsforum.comForum Statement on Federal Reserve’s Removal of Reputation RiskWashington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement after the Federal Reserve Board announced it will no longer consider reputation risk in its supervision of banks:“Today’s announcement by the Federal Reserve is another important step toward focusing bank supervision on material financial risk. This, taken with the action by other financial regulators, will help to foster a more transparent and effective supervisory framework. We look forward to continuing to work with the Administration and Congress to identify solutions that allow America’s leading banks to continue to best serve their customers.”###The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States.&nbsp; Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. Visit our website:&nbsp;<a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X&nbsp;<a href="https://twitter.com/fsforum">@fsforum</a>&nbsp;and&nbsp;<a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Forum Statement on Federal Reserve’s Removal of Reputation Risk

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Kevin Fromer

President and Chief Executive Officer

This op-ed was featured in <a href="https://www.americanbanker.com/opinion/basel-myths-are-all-too-real-for-the-financial-services-industry">American Banker</a>.&nbsp;To the editor,In a recent BankThink ("<a href="https://www.americanbanker.com/opinion/debunking-the-myths-about-the-basel-iii-endgame-regulation">Debunking the myths about the Basel III endgame regulation</a>," Jan. 18, 2024), the author is absolutely correct that the conversation about the possible increase in capital requirements must be based on facts. But from the very first sentence, the piece is filled with inaccuracies.First, just a<a href="https://www.bis.org/bcbs/implementation/rcap_reports.htm"> handful</a> of countries have implemented the agreement struck in Basel, Switzerland, in 2017. Like the United States, most of the jurisdictions around the world are at various stages of creating their rules. Thus far, the United States is proposing to increase capital to a<a href="https://fsforum.com/a/media/key-takeaways-b3e-comments.pdf"> much larger degree</a> for its global systemically important banks (GSIBs) than other jurisdictions. The U.K. is proposing a 3.2% increase for its GSIBs versus a 5.6% increase for the EU and an estimated 30% for U.S. GSIBs. The U.S. proposal's many inconsistencies with the international Basel agreement and Basel III endgame proposals in other jurisdictions would worsen, rather than improve, already substantial international discrepancies in capital requirements. Such divergences would harm the American economy and the ability of U.S. companies to compete internationally. So much for the stated goal of harmonizing international capital rules.Second, the implementation of the Basel III endgame for the largest U.S. banks has absolutely nothing to do with the regional banking turmoil last year. To the contrary, because of their strong capital positions, the largest U.S. banks were called upon by the government to step in and support the financial sector in March, putting billions of dollars of unsecured deposits into First Republic Bank to squelch contagion and give the Federal Deposit Insurance Corp. time to wind down the ailing institution.Federal Reserve Chair Powell has<a href="https://www.youtube.com/watch?v=627kC040sPU"> said</a> repeatedly that the nation's largest banks are "very strong" and a "source of strength." The largest U.S. banks have supported small and large businesses, households and communities, and helped to ensure smooth functioning financial markets during significant economic headwinds, such as the COVID-19 pandemic. In the past 15 years, U.S. GSIBs have more than tripled their common equity tier 1 capital to more than $900 billion. The largest U.S. banks also are subject to annual supervisory stress testing and have maintained capital<a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230628a.htm"> well in excess</a> of hypothetical losses estimated by those stress tests. These tests assume no emergency government support during an economic downturn.Finally, contrary to the author's statements, the largest U.S. banks and their more than 735,000 employees are<a href="https://fsforum.com/our-impact/essential-to-the-u-s-economy"> essential</a> to the strength and the competitiveness of the U.S. economy, supporting countless American households, businesses and governments every day, including those in historically underserved communities. In just one example, Forum members have invested more than $9.2 billion in Community Development Financial Institutions and committed more than $525 million to minority depository institutions since the beginning of 2020.The<a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29.html"> comment letters</a> in response to the proposal are still coming in, but organizations across the country — including the NAACP, small businesses, manufacturers, local lawmakers and others — have raised concerns with the Basel endgame proposal, including its potential impact on people in historically underserved communities.The financial crisis was 15 years ago. The nation's largest banks are strong and they are essential to our economy. Higher capital requirements would do more harm than good. And that's a fact.&nbsp;Kevin Fromer is the President and CEO of the Financial Services Forum. &nbsp;

Opinion

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Despite the demonstrated strength of the largest U.S. banks, the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, on split votes, issued a proposal in July 2023 to increase capital requirements. The proposal offers no reason or justification for material increases in capital requirements and would harm American households, businesses, and the broader economy. 

Given the complexity of the proposal, its many and significant negative impacts, and the lack of evidence in support of its changes, the agencies should repropose the rule and include the motivations, data and analysis that demonstrate the need for proposed changes.

Basel 3 Endgame 

Letter to the editor: Basel 'myths' are all too real for the financial services industry

This article originally appeared on <a href="https://fortune.com/2023/12/06/us-economy-could-face-perfect-storm-basel-iii-endgame-goes-into-effect-finance-banks-kevin-fromer/">Fortune</a>.&nbsp;The past three years of economic volatility have exacted a profound toll on many Americans, testing the resilience of households and businesses alike. During this period, the largest banks, fundamentally strengthened by a series of changes, have served as a source of support by extending enormous amounts of credit, helping customers navigate uncertainty, and stabilizing the broader banking sector at a critical moment. Now, as the CEOs of these banks gather on Capitol Hill, Congress must ask itself if proposed regulations on capital jeopardize the essential work of these institutions.The capital regulation plan known as Basel III Endgame will increase capital requirements by 20% or more for the eight largest U.S. banks. This is an excessive move, considering the <a href="https://fsforum.com/a/media/capital-and-the-nation%E2%80%99s-largest-banks.pdf">tripling</a> of high-quality capital for these banks over the past 15 years. Higher capital requirements, <a href="https://www.federalreserve.gov/newsevents/pressreleases/powell-statement-20230727.htm">as noted by Federal Reserve Chair Jerome Powell</a>, raise the cost of–and reduce access to–credit.The plan will certainly compound the burden of higher post-pandemic interest rates,&nbsp;<a href="https://www.urban.org/sites/default/files/2023-09/Bank%20Capital%20Notice%20of%20Proposed%20Rulemaking.pdf?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsletter_axiosmarkets&amp;stream=business">particularly for those with lower incomes</a>. Americans will have a harder time getting a loan, securing a mortgage, or saving for their retirement or a child’s college education.The impact isn’t limited to individual consumers. Small businesses&nbsp;<a href="https://fsforum.com/news/capital-insights-new-bank-capital-rules-will-handicap-small-businesses">relying</a>&nbsp;on credit and farmers&nbsp;<a href="https://www.americanbanker.com/opinion/basel-endgame-will-drive-up-costs-for-american-farmers-and-consumers">needing</a>&nbsp;funds for operations and equipment will face difficulty securing much-needed capital.A chorus of voices from the left and the right have come out against this proposed rule. Bipartisan consensus is rare these days, so the growing coalition of policymakers, advocacy groups, and community leaders warning against the negative impacts of stricter capital requirements is not something to take lightly. Senator&nbsp;<a href="https://www.politico.com/newsletters/morning-money/2023/09/14/the-calls-are-coming-from-inside-the-house-dems-rap-biden-bank-cops-00115837">Mark Warner (D-Va.)</a>&nbsp;has emphasized the potential compounding effect of tougher capital standards, high interest rates, and disruptions in the commercial real estate market as a “perfect storm.” Senator&nbsp;<a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=409027">John Tester (D-Mont.)</a>&nbsp;stated that he is worried about how this will impact working Americans, explaining he has “some concerns about the proposed changes, and what its impact will be on workers and households, small businesses, access to credit, and the overall vibrancy of our capital markets.”&nbsp;In a&nbsp;<a href="https://www.banking.senate.gov/imo/media/doc/basel_iii_banking_gop_letter.pdf">letter</a>&nbsp;to regulators, 39 Senate Republicans, led by Senator Tim Scott (R-S.C.), highlighted the resilience of the well-capitalized U.S. banking system and argued the proposal would negatively impact the economy while making credit costlier and more difficult to obtain for millions of Americans.Given these concerns, it is fair to ask why capital increases of this size are necessary. But no one seems equipped to provide an answer. On the contrary, the predominant official assessment of the banking sector, and the largest banks in particular, has been laudatory. As a matter of fact, every hypothesized loss the proposal aims to address has been experienced under real-life stress tests such as the pandemic, and the largest U.S. banks have continued to support the economy despite those losses under current capital requirements.Reflecting on the years of reform under the Dodd-Frank Act and Basel III, Chair Powell&nbsp;<a href="https://www.youtube.com/watch?v=627kC040sPU">highlighted</a>&nbsp;improvements in the banking system’s resilience, stating, “The large banks in the United States are very strong, well-capitalized, a lot of liquidity and they’ve been a source of strength, I think, through the last couple of events.”The future path of the U.S. economy is far from certain and hardworking Americans will pay a price if regulators demand new, unjustified capital requirements. Policymakers must demand extensive changes to the Basel III Endgame proposal so the banking sector can continue its essential role in the U.S. economy–and to avoid taxing consumers and businesses for no appreciable benefit to financial stability.Kevin Fromer is the president and CEO of Financial Services Forum.

Op-ed: The U.S. economy could face ‘a perfect storm’ if Basel III Endgame goes into effect. Here’s why

This op-ed was featured in the <a href="https://www.americanbanker.com/opinion/dont-delay-public-input-on-feds-review-of-capital-requirements">American Banker's BankThink.&nbsp;</a>&nbsp;<blockquote>Last month, Federal Reserve Vice Chair for Supervision Michael Barr outlined the Federal Reserve's agenda to make the financial system safer and fairer by improving banks' safety and soundness. Barr <a href="https://www.federalreserve.gov/newsevents/speech/barr20220907a.htm">called for a holistic review</a> of the bank capital framework, including a review of leverage and capital requirements for large banks. We welcome the Fed's review. And we urge the Fed to be more transparent about it.</blockquote>Mr. Barr is right. Currently, the U.S. capital framework is comprised of a dizzying array of moving parts: risk-weighted assets, stress capital buffers, surcharges on global systemically important banks, countercyclical buffers and leverage buffers, just to name a few. All these requirements are implemented separately, sometimes with several years between rules. No singular element of the capital regime determines overall capital requirements — rather, the various constraints knit together in complex and unpredictable ways to determine the overall amount of capital required of large banks. Given that capital requirements strongly influence the cost and amount of lending by banks in our economy, getting the mix of requirements right is critical, as is transparency around this process.&nbsp; Right now, all we know is that the Fed expects to complete its review this fall, and will only seek public input on proposed capital rules that are informed by the findings of the review after it is complete. We don't know much about how the review is being conducted, but we do know it is happening quickly — and without public input. But waiting for public input until so late in the game — once the direction of travel is set — is too late and risks consequential errors based on a lack of full information. The Federal Reserve should commit to seeking public feedback on its holistic review of the capital framework before the review is finalized and before any subsequent capital rules are proposed. Public feedback is crucial for several reasons.&nbsp; First, regulators' analysis can be improved by taking input from a variety of stakeholders, including academics and practitioners with significant expertise in bank capital.&nbsp; Second, public input will help ensure an evenhanded approach in reviewing the capital framework. A review solely conducted by regulators runs the risk of tipping the scales in a direction confirming existing policy preferences, even if there may be data supporting other perspectives.&nbsp; For example, studies have found that central bank-sponsored research on quantitative easing's effectiveness is more positive than other research on the topic. A full, open review of the capital framework soliciting input from a wide array of stakeholders will help ensure a thorough, unbiased and informed assessment.&nbsp; Most important, any study of the capital framework either implicitly or explicitly embeds a value judgment about the appropriate trade-off between economic growth and financial stability. Regulators are charged with maintaining financial stability, but they are not solely in charge of determining how society balances safety versus growth. Finding the right balance between growth and stability requires weighing the costs and benefits of additional financial stability measures against the impact on job creation and living standards. That debate must be informed by the views of all relevant stakeholders. The Federal Reserve and other agencies reviewing regulations routinely do so with public input. At least every 10 years, the bank regulatory agencies are <a href="https://egrpra.ffiec.gov/">required</a> by federal law to gather public input and review existing regulations. During the last cycle, regulators traveled the country for in-person meetings and collected written feedback. At one of these meetings, Federal Reserve Board Chairman Jay Powell <a href="https://www.federalreserve.gov/newsevents/speech/powell20150204a.htm">explained that</a> creating balanced, effective and thoughtfully calibrated regulations to avoid undue burden requires input from stakeholders. Researchers' review of the capital framework should also adhere to existing transparency standards for published academic research — and all of the data and analysis should be made public. The economics literature is replete with examples of studies that came to drastically incorrect conclusions because of simple data errors that were later uncovered by other researchers. Most academic journals now require that the data and programs used to conduct any analysis be made public before the results are published.&nbsp; The stakes are too high to accept even a small probability of an errant mistake. A comprehensive review of the capital framework and soliciting public input are necessary to ensure a safe and sound banking system in balance with the promotion of economic growth. Doing one without the other will be counterproductive — and risks reaching an outcome that does not reflect the needs of our economy.&nbsp;

BankThink Op-ed: Don't Delay Public Input on Fed's Review of Capital Requirements

Letters

Joint Trades Letter on Stress Capital Buffer Requirements

Joint Trades Letter on Stress Capital Buffer Proposal 

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The Forum supports the development of international standards that utilize the existing framework for banking assets when considering how to treat crypto assets for capital, liquidity and other regulations.

Digital Assets

Joint Trades Letter to PWG on Digital Assets Next Steps Recommendations

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The Role of Big Banks in Community Infrastructure

Forum President and CEO Kevin Fromer highlights how the nation's largest banks fund essential community infrastructure projects, showcasing their commitment to fostering growth and prosperity in America's cities and counties.

Video

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<ul><li>We hold more than $4.2 trillion in loans, accounting for 40% of total lending to businesses and households.</li><li>We provide more than $679 billion, or nearly half, of all consumer loans by banks in the U.S., supporting everything from the purchase of a new car to furnishing a new home.</li><li>Lending by our institutions accounts for 34% of total commercial and industrial (C&amp;I) lending by banks, helping businesses grow and contribute to the economy.</li><li>We represent a major source of lending to small businesses in communities across the country, holding $126 billion in small business loans&nbsp;and allowing the economy to grow at both a local and national level.</li><li>We also collectively meet nearly three-quarters of the bank funding needs of other financial institutions, supporting community banks, insurance companies and mortgage finance companies, for example, which then provide important services to businesses and households.</li></ul>

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Lending

Our institutions lend to consumers, businesses and other financial institutions, promoting savings and investment that positions individuals and entities at all layers of the U.S. economy for resiliency and success. At the same time, we are supporting consumers, governments, and businesses of all sizes in growing and creating American jobs.

<ul><li>We underwrite nearly three-quarters of debt and equity transactions – such as initial public offerings – among large institutions in the U.S., providing a critical service that other U.S. institutions cannot offer on a similar scale.</li><li>With $4.2 trillion of mutual funds and annuities under management, we support the retirement and other savings needs of many Americans.</li><li>We finance a significant portion of state and local government expenditures for vital projects, like hospitals, roads, bridges, and schools, through $120 billion in municipal securities holdings. Additionally, we support a large portion of federal government expenditures through $1.1 trillion in U.S. Treasury securities holdings.</li></ul>

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Liquid Capital Markets

Our institutions help foster deep and liquid capital markets, ensuring the U.S. government and private institutions are able to effectively finance public spending and investments in the real economy. 

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Our Employees

Our institutions collectively employ more than 750,000 people, offering a variety of benefits and opportunities to help our employees achieve their personal and professional goals.

Forum members increased credit to businesses and households by 10%
to nearly $8.3 trillion in 2020.


Essential to the U.S. Economy    

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Big Banks and Their Role in Small Business Lending  

Forum President and CEO Kevin Fromer discusses the vital role played by the nation's largest banks in supporting small businesses through lending, and the significance of meeting the needs of American companies as the foundation for a strong economy. 

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Understanding the Role of Big Banks in American Competitiveness

Forum Chief Economist Sean Campbell discusses the important role that the nation’s biggest banks play in helping American companies compete internationally and explains how American international competitiveness is critical to ensuring the success and vibrancy of the U.S. economy.

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Maintaining the international competitiveness of U.S. companies is vital to the success and vibrancy of the U.S. economy. The nation’s largest banks provide crucial support for American companies competing overseas. The Forum supports policies that enable large U.S. banks to continue their vital support of the American economy on the global stage. 

International Competitiveness

Videos

Fact Sheet

Capital and the U.S. Economy

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While continuing to support the traditional energy sector, the nation’s largest banks are financing the transition to a less carbon-intensive economy. Many of the traditional energy companies, and other companies as well, are pursuing opportunities for the more renewable, less carbon-intensive energy sources that will power our economy in the future. Forum members are committed to an “all of the above strategy” that finances our nation’s transition to a cleaner and more renewable energy future while also working to ensure that today’s energy’s needs can be met effectively and efficiently.


Energy Finance

Nation’s Largest Banks Supporting Energy Needs of Today and Tomorrow

The Nation's Largest Banks by the Numbers

Fact Sheets

Research

GSIB White Paper: The Rising Tide of Safe Assets and Large Bank Capital Requirements

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Member News

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Citigroup

Jane Fraser is the Chief Executive Officer of Citi, the world's most global bank, serving millions of consumers, businesses and institutions across 160 countries and jurisdictions. She is the first female CEO in the firm’s history. Jane has deep experience across Citi’s consumer and institutional businesses and, in many ways, she helped shape Citi into the company it is today. Before becoming CEO in February 2021, she was President of Citi and CEO of the Global Consumer Bank, responsible for all of Citi’s Consumer businesses, including Retail Banking and Wealth Management, Credit Cards, Mortgage and Operations and Technology in 19 markets. Before that, she was the Chief Executive Officer of Citigroup Latin America from 2015 to 2019. From 2013 to 2015, she was the Chief Executive Officer of the U.S. Consumer and Commercial Banking and CitiMortgage. From 2009 to 2013, Jane served as the Chief Executive Officer of Citi's Global Private Bank. Prior, Jane was the Global Head of Strategy and Mergers &amp; Acquisitions for Citi from 2007 to 2009. She joined Citi in 2004 in the Corporate and Investment Banking division. Before joining Citi, Jane was a Partner at McKinsey &amp; Company. She started her career at Goldman Sachs in the Mergers &amp; Acquisitions department in London and then worked for Asesores Bursátiles in Madrid, Spain. Jane serves as a Board Member for the Business Roundtable and the Council on Foreign Relations. She is Vice Chair for the Partnership for New York City and a member of Harvard Business School’s Board of Dean’s Advisors, the Stanford Global Advisory Board and the Economic Club of New York. Jane has an M.B.A. from Harvard Business School and an M.A. in economics from Cambridge University. She is married with two children.

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Jane Fraser

Citigroup Chief Executive Officer, Forum Chair

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BNY 

Robin Vince is President and Chief Executive Officer of BNY and a member of its Board of Directors. Previously, he was Vice Chair of BNY and CEO of Global Market Infrastructure. In that role, he oversaw BNY’s Clearance and Collateral Management, Treasury Services, Markets and Execution Services and Pershing businesses. Prior to joining BNY in October 2020, Robin was the Chief Risk Officer of Goldman Sachs and a member of the Management Committee. He joined Goldman Sachs in 1994 and held many leadership roles, including Treasurer, Head of Operations, Head of Global Money Markets, COO of the EMEA region and CEO of Goldman Sachs International Bank, among others. He served on several key subsidiary boards and governance committees. He was named managing director in 2002 and partner in 2006. Robin is a member of National Geographic Society's Hubbard Council and serves on the Board of Advisors of The Hospital for Special Surgery.

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Robin Vince 

BNY Chief Executive Officer, Forum Vice Chair

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Bank Of America

Brian Moynihan leads a team of more than 200,000 employees dedicated to making financial lives better for people, companies of every size, and institutional investors across the United States and around the world. Bank of America is recognized as a top employer by Working Mother magazine and Military Times. The company is also listed on Fortune magazine’s list of the Best Workplaces for Diversity and the Best Workplaces for Parents. It was also named one of the Best Places to Work for Disability Inclusion by the U.S. Business Leadership Network and the American Association of People with Disabilities. In 2018, Euromoney recognized Bank of America as the World’s Best Bank and the World’s Best Bank for Diversity and Inclusion, as part of their annual Global Awards for Excellence. Bank of America was also named the 2019 Catalyst Award winner, honored for supporting the continued development, empowerment and advancement of women in the company and around the world. Moynihan participates in several organizations that focus on economic and market trends, including the World Economic Forum International Business Council, the Financial Services Forum, the Bank Policy Institute (chair), the Business Roundtable, and the American Heart Association CEO Roundtable (co-chair). He is also a member of the Federal Advisory Council of the Federal Reserve Board. Moynihan leads the company’s Global Diversity and Inclusion Council and is a member of the museum council for the Smithsonian’s National Museum of African American History and Culture. Moynihan is also a member of the Brown University Corporation’s Board of Fellows and the Congressional Medal of Honor Foundation Board.

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Brian Moynihan

Bank Of America Chairman Of The Board And Chief Executive Officer

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The Goldman Sachs Group, Inc.

David Solomon is Chairman and Chief Executive Officer and a member of the Board of Directors of The Goldman Sachs Group, Inc. Previously, he was President and Chief Operating Officer and prior to that, he served as Co-Head of the Investment Banking Division from 2006 to 2016. Before that, Mr. Solomon was Global Head of the Financing Group, which includes all capital markets and derivative products for the firm’s corporate clients. He joined Goldman Sachs as a Partner in 1999. Mr. Solomon is a member of the Board of Trustees of Hamilton College and serves on the board of The Robin Hood Foundation.

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David Solomon

The Goldman Sachs Group, Inc. Chairman and Chief Executive Officer

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JPMorganChase 

Jamie Dimon is Chairman of the Board and Chief Executive Officer of JPMorganChase, a global financial services firm with assets of $2.5 trillion and operations worldwide. The firm is a leader in investment banking, financial services for consumers, small business, commercial banking, financial transaction processing and asset management. Dimon became CEO on January 1, 2006 and one year later also became Chairman of the Board. He was named President and Chief Operating Officer upon the company’s merger with Bank One Corporation on July 1, 2004. Dimon joined Bank One as Chairman and CEO in 2000. Dimon began his career at American Express Company. Next, he served as Chief Financial Officer and then President at Commercial Credit, which made numerous acquisitions and divestitures, including acquiring Primerica Corporation in 1987 and The Travelers Corporation in 1993. Dimon served as President and Chief Operating Officer of Travelers from 1990 through 1998 while concurrently serving as Chief Operating Officer of its Smith Barney Inc. subsidiary before becoming co-Chairman and Co-CEO of the combined brokerage following the 1997 merger of Smith Barney and Salomon Brothers. In 1998, Dimon was named President of Citigroup Inc., the global financial services company formed by the combination of Travelers Group and Citicorp. Dimon earned his bachelors degree from Tufts University and holds an MBA from Harvard Business School. He serves on the boards of directors of a number of non-profit institutions including the Clearing House and Harvard Business School. Additionally, he is the Chairman of the Business Roundtable and serves on the executive committee of the Business Council and the Partnership for New York City, and is a member of the Financial Services Forum, Financial Services Roundtable and Council on Foreign Relations.

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Jamie Dimon

JPMorganChase Chairman And Chief Executive Officer

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Morgan Stanley

Edward (Ted) Pick is the Chief Executive Officer of Morgan Stanley.Before becoming CEO in 2024, Mr. Pick served as Morgan Stanley's Co-President, Co-Head of Firm Strategy and Head of the Institutional Securities Group, overseeing Investment Banking, Equities, Fixed Income, Global Capital Markets and Research.&nbsp;In previous roles, Mr. Pick was Global Head of Sales and Trading, engineering a turnaround of the firm’s Fixed Income Division. As Head of Institutional Equities, he led that business to a leading global position. He also served as Head of Equity Capital Markets, helping the firm actively raise capital during the financial crisis.&nbsp;Mr. Pick joined Morgan Stanley in 1990 and was promoted to Managing Director in 2002. He is a member of the firm’s Board of Directors (2024), Operating Committee (2012), Management Committee (2008) and Morgan Stanley-MUFG Steering Committee (2013).Mr. Pick graduated Phi Beta Kappa from Middlebury College (1990) and received an MBA from Harvard Business School (1994). He is a Trustee at the Metropolitan Museum of Art (2018), and serves on the MET’s Nominating &amp; Governance Committees. Mr. Pick is Chair of the Advisory Board for the Morgan Stanley Alliance for Children’s Mental Health and a board member of the Institute of International Finance.

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Ted Pick

Morgan Stanley Chief Executive Officer

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State Street Corporation

Ron is chairman and chief executive officer of State Street Corporation. He is also a member of State Street Corporation’s Board of Directors. Ron was previously president and chief operating officer of State Street Corporation, and before that president and chief executive officer of State Street Global Advisors, the investment management arm of State Street Corporation. He joined State Street in 2015. Prior to State Street, Ron was president of Asset Management &amp; Corporate Services for Fidelity Investments, responsible for all Fidelity asset management organizations and Fidelity’s corporate functions and enterprise technology. He served at Fidelity from 2010 to 2014. Prior to joining Fidelity, Ron served as president and chief executive officer of BNY Mellon Asset Management in Boston, a position to which he was named in 2007. During this time, he also served as vice chairman of Bank of New York Mellon Corporation and was a member of its Executive Committee. Additionally, Ron oversaw all of Bank of New York Mellon’s activities in Asia. Prior to the 2007 merger of Bank of New York and Mellon, he was vice chairman of Mellon Financial Corporation and president and chief executive officer of Mellon Asset Management. He served at Mellon and Bank of New York Mellon from 1997 to 2010. Prior to Mellon, Ron was with McKinsey &amp; Company, Inc., from 1986 to 1997 and was elected a partner in 1992. He founded the Investment Management practice worldwide and was co-founder and co-leader of the firm’s North American Personal Financial Services practice. Additionally, he was a member of the Worldwide Property &amp; Casualty Insurance practice. During his tenure with McKinsey, Ron served in the firm’s Boston, New York, and Stockholm offices. Ron received his Bachelor of Arts degree in political science from Syracuse University in 1980 and his Master of Business Administration from Harvard Business School in 1986. Ron serves on the boards of Unum Corp. and Rhode Island Commerce Corporation. He also serves on the boards of Beth Israel Lahey Health, The Boston Foundation, IYRS School of Technology and Trades, Syracuse University and WBUR. Ron’s philanthropic and civic interests include corporate governance, retirement/healthcare policy and funding, education, and climate. He has led several initiatives on gender equality. Ron is a frequent speaker and writer, and an avid offshore sailboat racer.

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Ronald O'Hanley

State Street Corporation Chairman And Chief Executive Officer

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Wells Fargo & Company

Charles W. Scharf is chief executive officer and president, and a member of the Board of Directors of Wells Fargo &amp; Company. A financial services veteran with 24 years of experience in leadership roles in the banking and payments industries, Charlie served as chief executive officer of Bank of New York Mellon from July 2017 to October 2019 and the chairman of its board from January 2018 to October 2018. He also was chief executive officer and a director of Visa Inc. from October 2012 to December 2016. During his tenure at Bank of New York Mellon, Charlie demonstrated a strong track record in initiating and leading change, driving results, strengthening operational risk and compliance, and innovating amid a rapidly evolving digital landscape. As the CEO of Visa, Charlie transformed the firm into a technology-driven digital commerce company by partnering with the world’s leading technology companies to drive new payment experiences and introduce new technologies to improve payment system security. Previously, he was a managing director of One Equity Partners at JPMorgan Chase &amp; Co. and chief executive officer of Retail Financial Services at JPMorgan Chase. He also was chief executive officer of the retail division of Bank One Corp., chief financial officer of Bank One Corp., chief financial officer of the Global Corporate and Investment Bank division of Citigroup, and chief financial officer of Salomon Smith Barney and its predecessor company. Charlie earned a Bachelor of Arts degree from Johns Hopkins University and an MBA from New York University. He is a director of Microsoft Corporation, serves on the board of trustees of Johns Hopkins University, is a member of The Business Council, and is chairman of the New York City Ballet. He lives in New York City.&nbsp;

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