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Kevin Fromer

President and Chief Executive Officer

This week we learned that bank regulators may re-propose their rule to implement the Basel III Endgame in the United States.&nbsp; The potential changes were outlined in a <a href="https://www.federalreserve.gov/newsevents/speech/barr20240910a.htm">speech</a> by Federal Reserve Vice Chair for Supervision Michael Barr and were the first public explanation of the “broad and material” changes announced by him and Fed Chair Powell earlier in the year.As we await a re-proposal, it is worth considering some initial observations.First, it is important to consider the potential capital impact of 9 percent.&nbsp; In a world in which the largest U.S. banks are demonstrably very highly capitalized and strong, and in which the U.K. has announced its Basel III Endgame will result in an impact of less than 1 percent and the EU stands at 5.6 percent, we still fundamentally question why this proposal raises capital for U.S. banks, and why our policymakers would choose that outcome for the U.S. economy.&nbsp; Basel III Endgame was never intended to increase capital requirements. Given the array of strong prudential safeguards that have been enacted over the past 15 years, it is entirely unclear as to why any measurable increase in large bank capital is needed.&nbsp;Second, the process for reconsidering the proposal is an unusual one.&nbsp; We expect to see revisions that have been agreed by the Fed, the OCC, and the FDIC, but we will not see potential revisions of areas that are still being considered. Commenters will have to determine if their concerns were addressed and to what extent, or completely unaddressed.&nbsp; In addition, the re-proposal likely will be complex and lengthy.Third, the original proposal lacked critical economic analysis, including cost-benefit analysis, that is essential for the public to have and consider.&nbsp; Many decisions in the original proposal lacked justification, and for us, defied explanation.&nbsp; Hopefully, a re-proposal will address these serious shortcomings.The most meaningful changes previewed would alter the imposition of higher capital charges for certain credit exposures, equity exposures, and operational risk.&nbsp; What appears to be largely unaddressed, however, are very significant and higher charges for <a href="https://fsforum.com/a/media/basel-iii-endgame-market-making-requirement-threatens-liquidity,-economy,-and-financial-stability.pdf">exposures</a> associated with trading, market making, and underwriting.&nbsp; These activities are already subject to additional, stringent regulation post-financial crisis, including capital requirements.&nbsp; And they are no less important for the wide range of large companies, mid-market businesses, pensions, state and local governments and other institutions, like universities, which use the services of major banks to access capital, invest, grow and contribute to society. These bank customers serve people and businesses across the country, so not addressing these issues could, as experts have found, increase the costs or reduce the availability of the services they provide.In addition, the re-proposal appears to fall short of providing sensible capital requirements for lending to a wide swath of creditworthy businesses in the United States. The proposal of July 2023 provided a lower capital charge to corporates deemed to be “investment grade” if they are publicly traded (think General Motors), but would apply higher capital charges for companies that are arguably equally credit worthy but privately held (think Chick-fil-A).&nbsp; As we have pointed out, there are a relatively small number of publicly traded companies in the U.S., and many more private ones that would be subject to higher capital charges that are not justified by elevated credit risk.&nbsp; The re-proposal would carve out companies that are “regulated entities” like pensions and mutual funds, but everyone else – essentially non-financial companies – would still be subject to a higher capital treatment.&nbsp; There is no connection between whether a company is high risk or low risk and whether it issues publicly traded securities.&nbsp; If the re-proposal affirms this observation, we believe there will be significant interest in further work on this issue.We look forward to reviewing the re-proposal.&nbsp; It is important we get this right.

BankNotes Blog

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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 

Basel III Endgame: Where Things Stand

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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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