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Sean Campbell

Chief Economist, Head of Policy Research

<h3>Introduction</h3>Recently, the Federal Reserve indicated that banking regulators will soon release a proposal to implement a further revision to the large bank capital framework, known as Basel III Finalization.&nbsp; This “final” round of Basel reforms is often described as putting the “finishing touches” on the Basel III capital regime.&nbsp; Unfortunately, there are bigger and more consequential open issues with the current large bank capital regime that should be addressed before any “finishing touches” are considered.&nbsp; Moving ahead with Basel III Finalization before addressing these more fundamental concerns would be akin to painting the exterior of a new house before the roof has been finished.&nbsp; A house with a beautiful exterior that floods whenever it rains may have lots of curb appeal and may please the neighbors, but isn’t very functional for its inhabitants. &nbsp;In this post, we discuss the state of the large bank regulatory regime and review some important and long-standing concerns that should be addressed before moving ahead with Basel III Finalization.&nbsp;&nbsp;&nbsp;<h3>The Basel Process is Broken and Must Be Reformed</h3>Basel III Finalization is part of a broader, international standard-setting process in which regulators around the globe negotiate capital standards for internationally active banks.&nbsp; The underlying rationale for global coordination of capital policy is that banking is a global business and even small differences in capital regulation can drive large and destabilizing changes in banking activity.&nbsp; The Basel Committee on Banking Supervision (BCBS) has been setting global capital standards since 1988, but recent events strongly suggest a fundamental breakdown in the process that runs counter to the BCBS’s raison d’etre: globally coordinated and consistent bank capital requirements.Specifically, the European Union (EU) has <a href="https://www.bloomberg.com/news/articles/2022-11-07/eu-set-to-water-down-plan-for-new-bank-capital-standards?sref=DbQo3YbX">proposed</a> implementing Basel III Finalization in a way that significantly deviates from some of its key provisions and would lower the amount of capital required for EU banks relative to the amount that will be required of other banks implementing the reforms. European members of the Basel Committee have warned that this departure will “risk undermining global cohesion.” But this is not the first instance in which the EU banking sector has played by its own rules.&nbsp; Leading examples include not implementing other aspects of the <a href="https://www.risk.net/derivatives/7948491/jpm-eu-corporate-cva-exemption-could-split-swaps-liquidity">Basel III reforms</a> as well as recent EU-led changes to the GSIB surcharge methodology specifically designed to benefit certain <a href="https://fsforum.com/news/the-unlevel-playing-field-gets-even-steeper-changes-to-the-gsib-surcharge-for-european-banks-and-implications-for-the-united-states">EU banks</a>.&nbsp;&nbsp;&nbsp;This breakdown in the Basel process is fundamentally concerning and should be addressed before any additional Basel reforms are implemented in the U.S. Continued implementation of Basel capital reforms that are implemented differently would likely mean that capital requirements for U.S. banks would be raised while other banks around the world would not face the same increases. That would result in increased competitive inequities that undermine, rather than strengthen, the global capital framework.<h3>Large U.S. Banks Are Already Highly Capitalized</h3>The Basel III Finalization package is expected to raise capital requirements for large U.S. banks.&nbsp; Indeed, the EU deviations described above are motivated by the desire of the EU to soften the blow of the oncoming increases in capital requirements for European banks.&nbsp; Before moving ahead with Basel III Finalization, policymakers should consider one basic question: Do U.S. banks need additional capital and if so, why?The data and experience with respect to large bank capital levels is clear.&nbsp; Large banks have substantially raised their capital levels - both in absolute dollar terms and in proportion to their risk-weighted assets - over the past 15 years as shown in the figure below.&nbsp; In addition, as noted of large banks in the Federal Reserve Board’s most recent <a href="https://www.federalreserve.gov/publications/files/202211-supervision-and-regulation-report.pdf">Supervision and Regulation Report</a>, “recent stress test results suggest that these firms remain sufficiently well capitalized to continue lending to households and businesses in a simulated period of stress.”&nbsp; Finally, the recent real world stress test of the pandemic clearly showed that banks are a source of strength to the economy.&nbsp; Simply put, there is no compelling evidence suggesting that large banks suffer from a dearth of capital.&nbsp;<figure class="image"><img src="https://fsforum.com/a/media/screen-shot-2022-11-14-at-9.55.20-am.png"><figcaption>Source: Federal Reserve Y-9C</figcaption></figure>&nbsp;Capital is not a free resource in the economy.&nbsp; Ever increasing amounts of required capital will continue to <a href="https://fsforum.com/news/bank-capital-borrowing-costs-and-lending-demand-curves-still-slope-downwards">push up the cost of lending</a> and reduce economic growth.&nbsp;<h3>The Existing Large Bank Capital Regime Needs Significant Reform</h3>The Federal Reserve has recently announced a <a href="https://www.federalreserve.gov/newsevents/speech/barr20220907a.htm">holistic review</a> of the large bank capital regime.&nbsp; This review affords bank regulators with an important opportunity to take a step back and assess the current state of large bank regulation.&nbsp; Any reasonable review of the framework will show that there are several aspects of the capital regime in need of structural reform.&nbsp; These structural reforms should be undertaken, completed, and assessed over a period of time before any “finishing touches” are applied.&nbsp; A short list of reform areas would include:Review and recalibrate the GSIB Surcharge – Upon finalizing the GSIB surcharge in <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20150720a.htm">2015</a>, the Federal Reserve committed to periodic reviews of the GSIB surcharge to reflect economic growth.&nbsp; In addition, the pandemic has revealed significant deficiencies with the GSIB surcharge that also need to be addressed.&nbsp; The largest banks have safer balance sheets because of their increased reserve holdings caused by the Federal Reserve’s pandemic response, yet their GSIB capital charges – intended to reflect systemic risk – have increased merely due to the increased amount of those riskless assets.&nbsp; Any legitimate holistic review of the existing large bank capital regime must include a reconsideration and recalibration of the GSIB surcharge.Review and recalibrate the Supplementary Leverage Ratio (SLR) – Over the past few years, and especially since the onset of the pandemic, the SLR has become increasingly binding and has meaningfully contributed to declining liquidity in the U.S. Treasury market.&nbsp; Treasury market functioning has deteriorated so much that the Group of 30 recently <a href="https://group30.org/images/uploads/publications/G30_Treasury-Mkts-UPDATE_Final_Report.pdf">published</a> an update to its 2021 report exhorting regulators to recalibrate the SLR.&nbsp; In addition, recent <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4175429">research</a> from Federal Reserve economists finds that the SLR materially disincentivizes bank participation in the U.S. Treasury market.&nbsp; In light of the importance of the U.S. Treasury market to the U.S. economy and overall financial stability, it is imperative that regulators act quickly to address this significant problem.Review and reform the stress testing and stress capital buffer (SCB) process – The stress testing process that results in the annual determination of SCBs is opaque and results in substantial year-to-year variation in SCB levels.&nbsp; Over the past three years, the stress testing process has resulted in SCBs that fall by more than half for some while others have nearly doubled from one year to the next.&nbsp; This variability in year-to-year capital requirements injects unnecessary and unhelpful volatility that frustrates good, long-term capital planning.&nbsp; In addition, the opaque nature of the stress tests often produces results that are hard to align with any sensible notion of risk.&nbsp; The stress testing process should be overhauled to improve public transparency and reduce volatility.<h3>Conclusion</h3>Large U.S. banks are well capitalized and are serving our economy well in this period of heightened uncertainty and economic headwinds.&nbsp; There is no compelling evidence to suggest that large U.S. banks are anything but robustly capitalized.&nbsp; Over time, a number of significant and structural shortcomings with the current large bank capital framework have become apparent.&nbsp; These problems have been demonstrated over time and are based on hard facts, data, and research.&nbsp; Regulators should commit to reviewing and addressing these shortcomings before putting further “international” reforms into effect.&nbsp; Finally, the process for international coordination of bank regulation should be overhauled to ensure full coordination and implementation by all parties.&nbsp; A fractured system of coordination in which some countries routinely raise capital standards while others do not will increase, rather than reduce, financial instability and risk.&nbsp;

Article

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We advocate for sound policies that recognize the importance of ensuring that banks are able to support the economy, compete internationally, and remain strong. In particular, 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. 

The Forum has also weighed in on an international assessment of post-crisis reforms and the clear need to differentiate between jurisdictions and to acknowledge the progress made in the United States.


Capital and Financial Stability

Don’t Paint the House Before Finishing the Roof: Basel III Finalization and the Large Bank Capital Regime

<h3>Introduction</h3>Since the onset of the pandemic in the U.S. in 2020, U.S.-based Global Systemically Important Banks (GSIBs) have supported businesses, households and communities through expanded <a href="https://fsforum.com/news/the-three-legged-stool-how-large-banks-have-supported-the-economy-during-the-pandemic">lending</a>, increased <a href="https://fsforum.com/news/large-bank-resilience-supporting-depositors-during-the-covid-pandemic">deposits</a>, and robust securities <a href="https://fsforum.com/news/the-three-legged-stool-how-large-banks-have-supported-the-economy-during-the-pandemic">underwriting</a> for public companies seeking private capital.&nbsp; While all of this has been occurring, the Federal Reserve and the rest of the U.S. government have engaged in a massive fiscal and monetary stimulus that has directly and mechanically increased the size of the banking sector.&nbsp; The increased size of the banking sector has resulted in increased GSIB scores of all Forum members and will result in increased GSIB surcharges and capital requirements in 2023.&nbsp; Rising capital requirements will raise the cost of bank lending and depress economic activity at a time that the economy is facing headwinds.&nbsp; The scheduled increases to the GSIB surcharge are the result of government policy, are unrelated to any reasonable notion of systemic risk, do not signal any need for increased capital requirements, and should be arrested before they take effect in 2023.&nbsp;&nbsp;&nbsp;<h3>The Federal Reserve’s Balance Sheet and the GSIB Surcharge</h3>The Federal Reserve supplies the economy with two forms of money: currency and bank reserves.&nbsp; As the Federal Reserve expands its balance sheet by buying more government securities, it increases the amount of bank reserves in the system.&nbsp; During the pandemic, the Federal Reserve engaged in an unprecedented expansion of its balance sheet from roughly $4 trillion to $9 trillion to support the economy.&nbsp; For some perspective, during the financial crisis from 2008 to2009, the Federal Reserve expanded its balance sheet from $1 trillion to $2 trillion.&nbsp; By any standard, the balance sheet expansion we have witnessed recently is without precedent.When the Federal Reserve increases bank reserves, bank assets must rise because only banks can hold bank reserves.&nbsp; Banks have no choice in the matter because the Federal Reserve fully and solely controls the supply of bank reserves.&nbsp; The GSIB surcharge is a capital charge that only applies in the United States to the eight Forum members.&nbsp; According to regulators, the GSIB surcharge is intended to measure the “systemic risk” of a large bank and banks with higher GSIB scores face a higher capital requirement.&nbsp; The GSIB score is based on a complex amalgamation of balance sheet variables such as the size of a bank’s total assets, the amount of securities on its balance sheet, and the amount of certain deposits.&nbsp; As the Federal Reserve’s balance sheet has risen, so too have the total assets and other balance sheet variables of all Forum members.&nbsp; The concomitant rise in Forum member balance sheets is a largely mechanical and unavoidable consequence of the Federal Reserve’s balance sheet policy that has impacted all banks throughout the country.Below, we show two figures demonstrating the pervasive impact of the Federal Reserve’s balance sheet policy on Forum members and the entire banking sector.&nbsp; First, we show a plot of the Federal Reserve’s balance sheet and the aggregate GSIB score of Forum members.&nbsp; This chart clearly shows that starting in 2020 as the Federal Reserve balance sheet began to rise, so too did the GSIB score of Forum members.&nbsp; In the second chart, we show the aggregate GSIB score of all Forum members and that of all other large banks that are required to report their GSIB scores.&nbsp; None of these other large banks are subject to the GSIB surcharge, but are required to report the score for monitoring purposes.&nbsp; This chart also clearly shows that the behavior of Forum GSIB scores is directly in line with developments in the rest of the banking industry.&nbsp; As bank reserves have increased, so too have the total assets and other balance sheet variables of all banks.&nbsp; There is nothing unusual or unique about the recent experience of Forum members.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<figure class="image"><img src="https://fsforum.com/a/media/screen-shot-2022-11-02-at-11.58.34-am.png"><figcaption>GSIB scores calculated with bank Y-15 reports found at <a href="https://www.ffiec.gov/npw/Institution/TopHoldings.">https://www.ffiec.gov/npw/Institution/TopHoldings.</a> Total assets of the Federal Reserve found at <a href="https://fred.stlouisfed.org/series/WALCL.">https://fred.stlouisfed.org/series/WALCL.</a> GSIB scores weighted by total assets of the banks in each group, found at <a href="https://www.ffiec.gov/npw/FinancialReport/FinancialDataDownload">https://www.ffiec.gov/npw/FinancialReport/FinancialDataDownload</a>.</figcaption></figure>&nbsp;<figure class="image"><img src="https://fsforum.com/a/media/screen-shot-2022-11-02-at-11.58.52-am.png"><figcaption>Reserves and U.S. Treasuries are pulled from the call report: <a href="https://cdr.ffiec.gov/public/PWS/DownloadBulkData.aspx">https://cdr.ffiec.gov/public/PWS/DownloadBulkData.aspx</a>.</figcaption></figure>&nbsp;<h3>Increased GSIB Scores Despite Reduced Systemic Risk</h3>We have established that GSIB scores and surcharges are rising for reasons that are well beyond the control of the affected banks.&nbsp; In addition, however, GSIB scores are rising while systemic risk is declining.&nbsp; Said another way, the heightened scores paradoxically signal lower systemic risk.&nbsp; This is because large banks have significantly increased their holdings of cash and U.S. Treasury securities due to the unprecedented increase in bank reserves.&nbsp; Cash and Treasurys are among the safest financial assets in the world.&nbsp; Cash bears zero default risk while the full faith and credit of the U.S. government stands behind all U.S. Treasurys.&nbsp; &nbsp;A bank with significantly more safe cash and U.S. Treasurys surely presents less, not more, systemic risk to the economy.&nbsp; The figure below shows the increase in cash and U.S. Treasury holdings.&nbsp; Since 2019, cash and U.S. Treasury holdings of Forum members have increased by over $1.2 trillion.&nbsp; Increasing a bank’s GSIB surcharge because it holds “too much” cash and Treasury securities is simply nonsensical.&nbsp; But that is how the GSIB formula is working.&nbsp;&nbsp;<figure class="image"><img src="https://fsforum.com/a/media/screen-shot-2022-11-02-at-11.59.08-am.png"><figcaption>Reserves and U.S. Treasuries are pulled from the call report: <a href="https://cdr.ffiec.gov/public/PWS/DownloadBulkData.aspx">https://cdr.ffiec.gov/public/PWS/DownloadBulkData.aspx</a>.</figcaption></figure><h3>&nbsp;</h3><h3>Increased GSIB Surcharges Will Unnecessarily Raise Borrowing Costs</h3>Some may argue that the Federal Reserve is now engaged in a reduction of its balance sheet and that GSIB scores and surcharges will recede on their own.&nbsp; This argument ignores that current estimates suggest that it will take several years for the Federal Reserve’s balance sheet to normalize.&nbsp; The economy should not be saddled with incoherent and unhelpful capital policy for a period of years while it waits for “things to run their course.”&nbsp; Rather, the Federal Reserve should act now to arrest the oncoming changes and commit to a fuller reevaluation of the GSIB surcharge as part of the announced holistic review of the capital regime that was <a href="https://www.federalreserve.gov/newsevents/speech/barr20220907a.htm">described by the Federal Reserve’s Vice Chair for Supervision</a>.Capital is not a free resource.&nbsp; Capital requirements should reflect real, well-founded risk-based considerations and should not rise as an unnecessary consequence of government policy.&nbsp; The oncoming increases in GSIB surcharges <a href="https://fsforum.com/news/bank-capital-borrowing-costs-and-lending-demand-curves-still-slope-downwards">will result in higher borrowing costs</a> that will put downward pressure on economic activity in the near term.&nbsp; As capital requirements rise, so too will borrowing costs, which will reduce lending and economic growth.In light of current economic headwinds, it is all the more important to ensure that banks can proactively support lending and the economy.&nbsp; Unnecessary and counterproductive increases in capital requirements are never good, but are all the more damaging in the present circumstances.&nbsp;<h3>Conclusion</h3>A willingness to change one’s mind in light of new facts is a hallmark of good decision making.&nbsp; The period of the past few years has, if nothing else, presented the world with a whole new set of facts that demand consideration.&nbsp; The underlying motivations for the GSIB surcharge have been completely upended, and indeed, reversed, by the pandemic and the Federal Reserve’s unprecedented balance sheet policy response.&nbsp; We should not blindly follow a formulaic approach to increasing capital requirements without carefully taking stock of where we are and whether such an increase is warranted.&nbsp; Any reasonable analysis of the facts shows that increasing GSIB capital surcharges at this point in time is unwarranted, unhelpful, and will only serve to weaken our economy.&nbsp; The Federal Reserve should act swiftly to halt these increases before they take effect in January.&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Raising the Cost of Credit at the Wrong Time: The Unnecessary and Counterproductive Rise in the GSIB Surcharge

<h3>Introduction</h3>The past several weeks have seen heightened volatility in the UK government bond, or gilt, market that has been met with a significant policy response by the Bank of England (BoE).&nbsp; At first, the BoE responded to falling prices and rising yields simply by buying gilts to reduce volatility and raise prices.&nbsp; The second-round policy response was for the BoE to launch a Temporary Expanded Collateral Repo Facility to lend cash in exchange for gilts to banks on behalf of banks’ pension fund clients.&nbsp; This repo facility is potentially important as much of the heightened volatility stems from forced selling by pension funds who bought gilts with borrowed funds and don’t have the liquidity needed to make the required “margin call” when prices fall.&nbsp; The ability to pledge gilt collateral in exchange for cash would allow pension funds to make the required margin calls and maintain their gilt position rather than selling it and creating further downward price pressure.&nbsp;&nbsp;These recent and seemingly unusual events should make all of us ask one simple question ...&nbsp; Why?&nbsp; More specifically, why is the government now engaging in an activity that is typically carried out by the private sector?<h3>The Mystery of Missing Intermediaries</h3>Government bond markets are intermediated primarily by large bank “market makers” that routinely buy and sell government bonds from client end users such as pensions and asset managers.&nbsp; The events of the past few weeks in the U.K. government bond market are unusual and should come as a surprise.&nbsp; Normally, when selling pressures push prices down, market makers deploy their balance sheet to purchase assets, build inventory, and provide liquidity to the market.&nbsp; They provide liquidity to support their clients because market making is a longstanding business activity that mutually benefits market makers and their clients.&nbsp; Clients benefit by having market makers “take the other side” of the trade they wish to make and market makers earn a fee for providing liquidity to their clients.&nbsp; In addition, large bank market makers are also typically significant suppliers of credit to their clients – often in terms of repo financing like the kind now being offered by the BoE.&nbsp;Both the outright government purchases of gilts and the creation of a special facility with the expressed purpose of facilitating bank-client repo financing by the BoE indicates that private market intermediaries are not stepping in to provide liquidity as market forces would generally predict.&nbsp;<h3>A Theory of the Case</h3>Some insight into the present lack of private liquidity provision in the UK government bond market can be gleaned from recent analysis on the effects of the Supplementary Leverage Ratio (SLR).&nbsp; The G30 recently issued a <a href="https://group30.org/publications/detail/5064">report</a> on the liquidity of the U.S. Treasury market.&nbsp; In that report, the authors find that “[i]n large measure because of the massive expansion in recent years of the Federal Reserve’s balance sheet (and the accompanying expansion of central bank balances on bank balance sheets), risk insensitive leverage ratios (notably the Supplementary Leverage Ratio [SLR]) have become the binding regulatory constraint on the allocation of capital for most of the banks whose dealer subsidiaries are the largest providers of liquidity to the Treasury markets.” &nbsp;The G30 report is focused on the U.S. and the U.S. Treasury market, but the same economic forces have been operating across the globe as the SLR is applied internationally and central banks across the globe, including the BoE, have massively increased the size of their balance sheets in the wake of COVID.&nbsp; Indeed, a recent <a href="https://fredblog.stlouisfed.org/2020/02/central-banking-since-1701/?utm_source=series_page&amp;utm_medium=related_content&amp;utm_term=related_resources&amp;utm_campaign=fredblog">analysis</a> showed that the BoE’s balance sheet, as a proportion of GDP, is now larger than it has ever been since 1701! &nbsp; As central bank balance sheets have ballooned, leverage requirements have become more binding, putting pressure on the ability of bank dealers to provide liquidity.The fundamental problem being pointed out by the G30 report is that intermediating government bonds is a relatively low-risk and low-return activity for market making banks.&nbsp; At the same time, the SLR effectively applies the same capital requirement to both low-risk and low-return activities as it does to high-risk and high-return activities.&nbsp; As a result, market makers are disincentivized from investing in and intermediating low-risk and low-return assets such as government bonds because their return on invested capital is higher for higher-risk and higher-return activities.The squeeze put on the intermediation of low-risk and correspondingly low-return assets such as government bonds has been widely understood and studied for some time.&nbsp; Economists such as Darrell Duffie of Stanford University have <a href="https://www.risk.net/cutting-edge/views/2479855/why-the-leverage-ratio-distorts-market-making">warned</a> for years of the oncoming liquidity strains due to the ascendant and increasingly binding leverage ratio.&nbsp; Indeed, even regulators themselves have acknowledged that tighter capital markets regulation may indeed necessitate more official sector intervention to maintain market liquidity.&nbsp; As far back as 2014, the Committee on the Global Financial System (CGFS), a group of central bankers, issued a <a href="https://www.bis.org/publ/cgfs52.pdf">report</a> considering how central banks could ease liquidity strains in a world where private market liquidity provision is more constrained.&nbsp; Indeed, the report highlighted the potential dangers of continued official sector intervention when it wrote that “backstopping market liquidity directly risks structurally distorting economic incentives for market participants and, as a result, could aggravate liquidity illusion,” referring to market participants’ overestimation of market liquidity.<h3>The Next Shoe to Drop?</h3>Predicting the future is a notoriously fraught exercise.&nbsp; As one looks at recent ructions across the pond, however, it is important to ask whether the UK’s government bond market volatility could soon arrive on our own shores.&nbsp; As the Federal Reserve normalizes its balance sheet, it will increasingly rely on the large bank dealer community to intermediate heightened flows in the Treasury market.&nbsp; Large banks operating near capacity coupled with large flows into and out of the Treasury market do provide the necessary preconditions for a liquidity event.&nbsp; More specifically, with less intermediation capacity or “balance sheet” being devoted to government bonds, the impact of any particular shock to the government bond market is likely to be felt more widely and for a longer period of time.&nbsp; Consider the analogy to the effects of a single fender bender on a congested highway.&nbsp; If the highway is uncrowded, a single fender bender goes largely unnoticed.&nbsp; If the highway is packed bumper to bumper, a single fender bender reverberates through the entire traffic jam causing considerably more damage.&nbsp;Treasury Secretary Janet Yellen recently <a href="https://www.yahoo.com/now/yellen-worries-over-loss-adequate-210517210.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAGCrPM6fQhwkEsyWtG6elk_xN3wVgZS4-_VwDId7sBKBscOO2IdXZ-ySjWGhhV3K_nggIljjMaF3lo86z_q9rN3x2hALmSUgODHD1LlttsHSW818TULuWdOLnloqfoNC-abPLDREBLa2bXO-i75DA6w66l9Uaf4VFDqYQDyKXH5m">recognized</a> the potential for heightened illiquidity in the U.S. Treasury market and connected that possibility to the strains caused by the SLR. Whether such an event occurs is impossible to forecast, but if such an event occurs it is highly likely that the reverberations will be stronger and last longer given current regulatory constraints.&nbsp; It also remains to be seen whether the U.S. would actively step in and replace private sector market makers to restore liquidity while at the same time distorting incentives as presaged by the CGFS.&nbsp; Finally, it should also be noted that the U.S. Treasury has also recently <a href="https://www.reuters.com/markets/us/us-treasury-asks-major-banks-if-it-should-buy-back-us-government-bonds-2022-10-14/">inquired</a> about the prospect of purchasing certain “off-the-run” and less liquid Treasury securities for the expressed purpose of improving Treasury market liquidity.&nbsp; Again, under normal circumstances private markets, not government intervention, would regulate liquidity levels. &nbsp;<h3>Conclusion</h3>The recent bout of volatility in the UK gilt market and associated official sector response raises real questions about the incentives to engage in private market making in the government bond market.&nbsp; The potential for a liquidity pullback in this low-risk, low-return market has been recognized for years.&nbsp; Indeed, the Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210319a.htm">committed</a> to reviewing the SLR in recognition of exactly this basic concern. &nbsp;And now this important issue is receiving new and justified attention from academic economists, central bankers and other government officials.&nbsp; The increasingly binding nature of risk-insensitive leverage ratios makes private market intermediation less economic and puts more of the onus on governments to maintain market liquidity – especially in low-risk asset markets like government bonds.&nbsp; Regulators should reflect upon recent events in the UK and ask whether current regulations appropriately incentivize the private sector to provide liquidity and whether permanently increasing the government’s role in provision of market liquidity is desirable or justified.&nbsp; Finally, the appropriate role of governments in intermediating our private capital markets is an important public policy question that deserves more attention and consideration from policymakers. &nbsp;

Gilts, Pension Funds and Central Banks: What Goes Around Comes Around?

BankNotes Blog

Dear reader,Welcome to the latest edition of The Forum File. In this edition, we are highlighting our firms’ work to strengthen economic advancement and wealth creation in minority 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&nbsp;<h2>Penny For Your Thoughts</h2><a href="https://newsroom.wf.com/English/news-releases/news-release-details/2022/Wells-Fargo-Names-Otis-Rolley-as-Head-of-Social-Impact/default.aspx">Otis Rolley</a> joined Wells Fargo this summer as President of the Wells Fargo Foundation and head of Philanthropy and Community Impact. He joined Wells Fargo from the Rockefeller Foundation&nbsp;<h3>First, congratulations on your new role. Can you give us an overview of your responsibilities at Wells Fargo?</h3>I am responsible for Wells Fargo philanthropy, employee volunteerism and giving, and leading the company’s strategic vision on advancing community impact. I believe racial equity and improving outcomes for historically marginalized groups should be centered in all the work we do. I am excited about leading the Wells Fargo Foundation and an annual philanthropy budget of roughly $300 million and working with leaders across the company to drive meaningful change through both our philanthropic giving as well as through our business products and services.<h3>Can you tell us a bit about your background and experience?</h3>I am an urban planner by training and am fascinated by the complex barriers people face when it comes to economic opportunity and ways in which to remove them. I started my career in Baltimore municipal government advocating across five administrations for better housing, support for small businesses and infrastructure. Most recently I led national leading initiatives at the Rockefeller Foundation. I’ve come to understand what an effective public-private partnership looks like at scale and how all sectors need to collaborate to effect change.<h3>Why did you choose to join Wells Fargo?</h3>I want to drive positive change in local communities, especially for those facing the greatest barriers. I've been focused on that my entire career. Leading social impact at Wells Fargo is an opportunity to take my experience and vision and put it to work on a larger scale with more resources.I honestly approached the interview process as a two-way conversation. There is a saying, do not talk about it, be about it. I felt that CEO Charlie Scharf was being about it in a real and systemic way and that there was values alignment between myself and the company.The company knows it has more work to do.Changes aren't going to happen overnight, but they can't happen at all without dedicated human and financial resources and a commitment from the top. I believe change is happening and wanted to be on the journey with Wells Fargo.&nbsp;<h3>Do you have a vision or goal that you hope to achieve within Wells Fargo?</h3>At Wells Fargo, our vision is to strengthen historically marginalized communities through economic advancement and wealth creation. Our priorities for the Wells Fargo Foundation are tied to our expertise – building financial health, creating greater access to quality homes, enabling small businesses to thrive, and supporting a low-carbon future. We recently launched a $60 million program called WORTH which aims to create 40,000 homebuyers of color by 2025 in eight markets. Our Open for Business Fund is benefiting more than 150,000 small businesses. My goal is to accelerate this work and add my personal and work experience to the process.<h2>&nbsp;</h2><h2>Value Add</h2>Wells Fargo’s WORTH Initiative Continues to Build Homeownership Opportunities; Partnering to Expand Entrepreneurial Equity&nbsp;<figure class="image"><img src="https://fsforum.com/a/media/wells-fargo-worth-img.jpeg"></figure>&nbsp;As a company, Wells Fargo is committed to creating opportunities for more people of color to buy their own homes, which in turn, grows generational wealth. Launching in 2022 across eight U.S. markets, Wells Fargo’s Wealth Opportunity Restored Through Homeownership (WORTH) initiative is a $60 million national effort to address systematic barriers to homeownership for people of color. Nationally, WORTH aims to help create 40,000 new homeowners of color by the end of 2025.The WORTH initiative builds on Wells Fargo’s ongoing efforts to increase racial equity in homeownership. &nbsp;Wells&nbsp;Fargo’s $40&nbsp;million Growing Diverse Housing Developers program is also working to expand housing inventory in communities of color, among other initiatives. The company also recently launched a Special Purpose Credit Program to help eligible homeowners of color whose mortgages are serviced by Wells&nbsp;Fargo lower their interest rates and reduce their monthly mortgage payments.Helping more people have an equitable pathway to entrepreneurship is also a priority for Wells Fargo. This year the company joined forces with Third Way and the National Urban League to launch the <a href="https://www.aeequity.org/">Alliance for Entrepreneurial Equity</a>, a one-of-a-kind effort that will develop and promote federal policies to increase opportunities for entrepreneurs of color and women to start and expand successful businesses. To amplify the need for entrepreneurial equity, Wells Fargo hosted an <a href="https://www.washingtonpost.com/washington-post-live/2022/09/13/business-founders-color-policymakers-entrepreneurial-equity/">event with the Washington Post</a> with CEO Charlie Scharf, Sheila Johnson, co-founder of BET and CEO of Salamander Resorts, and Marc Morial, President of the National Urban League. Together, their conversation focused on the role of the private sector and government in supporting the creation, sustainment, and expansion of women- and diverse-owned small businesses.The conversation continued with <a href="https://www.sba.gov/person/isabella-casillas-guzman">Small Business Administration</a> Administrator Isabella Casillas Guzman and Havenly co-founders <a href="https://havenly.com/team/">Lee Mayer and Emily Motayed Lancaster</a> about the entrepreneurial landscape, equitable access to economic opportunity and the role of early investment.&nbsp;<h2>Capital Gains</h2>What we’re doing in Washington&nbsp;In a <a href="https://www.americanbanker.com/opinion/dont-delay-public-input-on-feds-review-of-capital-requirements">new op-ed</a> in the American Banker, Forum President and CEO Kevin Fromer urged the Federal Reserve to be more transparent and to solicit public input for its comprehensive review of the bank capital framework: “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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Forum issued a <a href="https://fsforum.com/news/forum-statement-on-fdic-s-unbanked-households-survey">statement</a> regarding the FDIC’s <a href="https://www.fdic.gov/news/press-releases/2022/pr22075.html">2021 National Survey of Unbanked and Underbanked Households</a>, which found that the share of unbanked households has dropped to historic lows. The Forum noted that our members have long been on the frontlines in the effort to bring unbanked and underbanked Americans into the financial mainstream, and the survey’s encouraging results reflect our members’ ongoing commitment to that goal.The Forum and other trade associations provided <a href="https://fsforum.com/a/media/commentletterprudentialtreatmentofcryptoassetexposures.pdf">joint comments</a> to the Basel Committee on Banking Supervision regarding the committee’s second consultative document on the prudential treatment of cryptoasset exposures. The trades welcomed the Basel Committee’s continued focus on designing a prudential framework for cryptoassets that is risk sensitive and looked forward to continuing collaboration with the committee as the markets continue to evolve.&nbsp;<h2>Our Two Cents</h2>Research from the Forum&nbsp;The BankNotes Blog Spotlighted:<ul><li>Research and recent data from the U.S. banking system demonstrating that <a href="https://fsforum.com/news/bank-capital-borrowing-costs-and-lending-demand-curves-still-slope-downwards">increasing capital requirements reduces lending</a>.</li><li>Questions raised about the <a href="https://fsforum.com/news/gilts-pension-funds-and-central-banks-what-goes-around-comes-around">incentives to engage in private market making in the government bond market</a> in light of the recent bout of volatility in the UK gilt market.</li><li>Scheduled increases in GSIB capital surcharges and explained how they’re <a href="https://fsforum.com/news/raising-the-cost-of-credit-at-the-wrong-time-the-unnecessary-and-counterproductive-rise-in-the-gsib-surcharge">unwarranted, unhelpful, and will only serve to weaken our economy</a>.</li><li>The bigger and more consequential <a href="https://fsforum.com/news/don-t-paint-the-house-before-finishing-the-roof-basel-iii-finalization-and-the-large-bank-capital-regime">open issues with the current large bank capital regime</a> that regulators should address before moving ahead with Basel III Finalization.</li></ul>&nbsp;<h2>Checking the Balance</h2>Members in the newsBank of America&nbsp;<a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2022/10/bank-of-america-doubles-mdi-deposits-with-additional--100-millio.html">announced</a>&nbsp;an additional $100 million in low-cost deposits to minority depository institutions (MDIs), which will facilitate lending, housing, neighborhood revitalization and other banking services in minority and low- to moderate-income communities. The announcement doubles the bank’s commitment to deposits in MDIs, part of the company’s&nbsp;<a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2021/10/bank-of-america-s-community-development-financial-institution-lo.html">$2 billion portfolio</a>&nbsp;of loans, deposits and investments in Community Development Financial Institutions (CDFIs) and MDIs.Eight&nbsp;Citi&nbsp;leaders were&nbsp;<a href="https://blog.citigroup.com/2022/10/eight-citi-leaders-named-to-american-bankers-2022-most-powerful-women-lists/">named</a>&nbsp;to American Banker's 2022 Most Powerful Women Lists while Citi continues to raise the bar for diversity with its newly announced expansion of&nbsp;<a href="https://blog.citigroup.com/2022/09/a-commitment-to-increase-our-diversity/">diversity representation goals</a>&nbsp;to include additional markets and underrepresented groups.BNY Mellon <a href="https://www.prnewswire.com/news-releases/bny-mellon-launches-new-payment-platform-vaia-for-payee-choice-disbursements-301656750.html">launched</a> Vaia, an aggregated payment platform that gives U.S.-based institutions access to digital payment options for disbursements. Integrated with BNY Mellon, institutions can provide their payees with access to a range of payment choices – including real-time payments, Same-Day ACH, Tokenized Payments, and debit cards – on a client-branded front end. Vaia leverages BNY Mellon's Account Validation Services to verify payee identities and validate accounts end-to-end, helping to mitigate payment fraud.Goldman Sachs&nbsp;<a href="https://fortune.com/2022/11/01/advancing-allyship-goldman-sachs/?xid=soc_socialflow_twitter_FORTUNE&amp;utm_source=twitter.com&amp;utm_campaign=fortunemagazine&amp;utm_medium=social">hosted</a>&nbsp;its inaugural Advancing Allyship conference which brought together renowned thought leaders in diversity, equity, and inclusion to collectively advance the firm’s commitments toward allyship for its employees and communities. The firm will also be releasing a series of Allyship guides for clients and companies to help foster a culture of inclusion.JPMorgan Chase&nbsp;<a href="https://www.jpmorgan.com/technology/code-for-good-10-years">celebrated</a>&nbsp;the 10-year anniversary and hosted its 100th&nbsp;Code for Good hackathon in New York City. The program pairs university students with JPMorgan Chase technology professionals to develop creative solutions to help global nonprofits. After the event concludes, solutions are implemented for the nonprofits and the JPMorgan employees continue to serve as mentors for the students. The firm recognizes that many nonprofits have a need for technology resources to improve their operations.Morgan Stanley, in partnership with Centri Tech Foundation,&nbsp;<a href="https://www.morganstanley.com/press-releases/inaugural-winners-of-the-social-justice-innovation-awards">announced</a>&nbsp;the inaugural winners of the&nbsp;<a href="https://cts.businesswire.com/ct/CT?id=smartlink&amp;url=https%3A%2F%2Fwww.sjiawards.org%2F&amp;esheet=52930155&amp;newsitemid=20220929005552&amp;lan=en-US&amp;anchor=Social+Justice+Innovation+Awards&amp;index=1&amp;md5=e0f524dfc05d0190cd7863547f3fcd6f">Social Justice Innovation Awards</a>. This new strategic initiative aims to advance social and racial justice and help drive greater inclusive economic opportunity. The awardees will participate in a nine-month collaborative program in which they receive leadership coaching, support for tech-enabled strategies and access to professional networks. Each organization will also be awarded $250,000 to support their work.State Street&nbsp;<a href="https://newsroom.statestreet.com/press-releases/press-release-details/2022/State-Street-Commits-to-Management-Leadership-for-Tomorrows-Hispanic-Equity-at-Work-Certification-Program/default.aspx">announced</a>&nbsp;its commitment as an inaugural employer pursuing the Management Leadership for Tomorrow Hispanic Equity at Work Certification. This first-of-its kind certification sets clear, measurable standards for achieving Hispanic equity internally and for contributing to Hispanic equity in society. This Certification will provide State Street with a guide to evaluate equity in the workplace and builds on the bank’s&nbsp;<a href="https://www.statestreet.com/values/inclusion-diversity/10-actions-to-address-racism-and-inequality.html">10 Actions to combat racism and inequality commitment</a>.The&nbsp;Wells Fargo&nbsp;Foundation and nonprofit Elevate are <a href="https://newsroom.wf.com/English/news-releases/news-release-details/2022/Wells-Fargo-Elevate-Team-Up-to-Boost-Access-to-Clean-Affordable-Energy-and-Jobs-/default.aspx">collaborating</a> to provide Chicago residents with access to clean, low-cost energy and inclusive workforce development opportunities. The two-year project, which is supported by a $3.15 million grant from the Wells Fargo Foundation, will support the decarbonization of approximately 100 homes for people with lower incomes. The effort will also expand access to&nbsp;<a href="https://urldefense.com/v3/__https:/www.elevatenp.org/contractor-workforce-development/__;!!F9svGWnIaVPGSwU!okQy6cjPln_FXr7SDKq2HPLbl8C23Tvro3by7cVh-eMaSBw5cMhCE9YyRCGixUb3sH5-n6PgXI9KyS69gss0Clc$">Elevate’s Contractor Accelerator</a>, which connects women and contractors of color with training and resources to work on clean energy projects.

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The Forum File, 2022 Edition #6 

Dear reader,Welcome to the latest edition of The Forum File. In this edition, we are highlighting our firms’ work to increase access to banking and financial services in local communities across the country.We hope you enjoy reading this edition and please do not hesitate to share your feedback.Kevin Fromer, President and CEO, Financial Services Forum&nbsp;<h2>Penny For Your Thoughts</h2>Shannel Heath, Community Manager at JPMorgan Chase &amp; Co.&nbsp;<h3>How does JPMorgan Chase connect with local communities?</h3>At JPMorgan Chase, we value the relationships we build with our clients and strive to best assist the local communities in which we operate. The community manager role helps us interact more effectively with different communities across the country.As a community manager for JPMorgan Chase in Cincinnati, I work to help increase access to resources, financial health tools and services, particularly in underserved communities in our area. I understand firsthand the challenges of achieving one’s financial aspirations and have worked hard to help make banking and personal finance less intimidating for our clients. Community managers help build trust with members of the community by hosting different community events, financial literacy workshops and by engaging people inside the bank. That’s why it is also important that all our community managers live in the communities we serve.<h3>What tools do community managers at JPMorgan Chase have to help individuals create financial health?</h3>Banking and personal finance can be an overwhelming topic for people of all ages and backgrounds, especially those from underserved communities. Community managers offer free and public workshops that cover various personal finance topics such as opening a bank account, building a budget, saving for a down payment and improving credit health. Additionally, we help educate people on important products and services, such as Chase <a href="https://www.chase.com/personal/checking/savings-program">Autosave</a>, a digital tool that automatically transfers money from a customer’s Chase checking account to their savings account.&nbsp;<h3>How does JPMorgan Chase’s Racial Equity Commitment fit into its connection with local communities?</h3>In October 2020, JPMorgan Chase committed $30 billion to <a href="https://www.jpmorganchase.com/impact/racialequity">advance racial equity</a>. As part of this commitment, we have continued to outline how we are advancing our commitment and providing updates to our stakeholders. Hiring community managers is an important part of advancing this commitment and reaching goals related to increasing homeownership and affordable housing; growing and strengthening small businesses; and improving access to banking in Black, Hispanic and Latino communities.To reach these goals, our bank is opening additional community center branches that are designed to collaborate with local organizations to offer free skills training and space for small business pop-ups. In 2021, the bank hosted some 1,300 financial health workshops across the country, reaching more than 36,000 people. Additionally, 47 of the 100 new branches opened by JPMorgan Chase in 2021 are located in low- to moderate-income communities. JPMorgan Chase representatives and community managers have mentored more than 1,000 Black, Hispanic and Latino small business owners.We are working to close the racial wealth gap. For me, that all starts with a single customer. If I’m focused on that customer, I’m doing my job.&nbsp;<h2>Value Add</h2><figure class="image"><img src="https://fsforum.com/a/media/istock-1047954426.jpg"></figure>According to <a href="file:///C:/Users/Brigid%20Richelieu/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/2UFIL28J/but%20take%20a%20more%20cautious%20approach%20then%20men,">new research</a> from&nbsp;<a href="https://www.jpmorganwealthmanagement.com/">J.P.&nbsp;Morgan Wealth Management</a>, Black and Hispanic Americans prefer to have more control over their investments and care more about the social impact of companies they are investing in. J.P.&nbsp;Morgan surveyed more than 2,000 Americans this year to understand what motivates – or prevents – them from getting invested.The J.P.&nbsp;Morgan Wealth Management Diverse Investor Study found that 59% of Black Americans and 57% of Hispanic Americans want to take an active role in selecting the stocks, bonds or funds that make up their investment portfolio, compared to 46% of White Americans. According to the study, Black and Hispanic Americans also care more about the social impact of the companies they’re investing in, and it’s important that their investments:<ul><li>are Black, Indigenous and People of Color (BIPOC)-owned, started, and/or operated (70% and 46%, compared to 27% of White and 31% of Asian),</li><li>have a positive environmental impact (72% for both Black and Hispanic, compared to 55% of White and 57% of Asian),</li><li>are women-owned, started, and/or operated (60% and 48%, compared to 30% of White and 40% of Asian),</li><li>promote gender and racial equity and diversity (66% and 54%, compared to 35% of White and 42% of Asian)</li></ul>Despite volatility and uncertainty, most investors are not concerned about market decline. The study found that overall, the majority of investors are concerned about rising inflation and interest rates (88%), would not be concerned about a 20% dip in their portfolio (69%), and automate their investments on a regular basis (58%). Additionally, the study found that women are optimistic about their financial situation, with 59% of women saying their financial situation is better now than five years ago, compared to 62% of men. However, women are taking a more cautious approach than men, with 45% of women describing their investing strategy as cautious, compared to 33% of men.Readers can learn more about the J.P.&nbsp;Morgan Wealth Management Diverse Investor Study findings <a href="https://www.jpmorganchase.com/news-stories/jpmc-black-and-hispanic-americans-prefer-to-take-more-control-over-their-investments-and-are-driven-by-purpose">here</a>.&nbsp;<h2>Capital Gains</h2>What we’re doing in Washington&nbsp;In a new video, the Forum highlighted the strength and resiliency of the nation’s largest banks and their contributions to the economy featuring key quotes and clips from federal regulators.<div class="raw-html-embed"><iframe src="https://player.vimeo.com/video/748175654?h=efe677f1c3" width="640" height="564" frameborder="0" allow="autoplay; fullscreen" allowfullscreen=""></iframe></div>&nbsp;<h2>Our Two Cents</h2>Research from the Forum&nbsp;The BankNotes Blog Spotlighted:<ul><li>The substantial contributions of Forum members in <a href="https://fsforum.com/news/large-banks-and-small-businesses-supporting-small-businesses-all-across-the-country">supporting small businesses</a> and the economy.</li><li>How Forum members, as global banks that have deep expertise in foreign markets, are <a href="https://fsforum.com/news/large-bank-support-for-the-international-competitiveness-of-u-s-companies">uniquely positioned</a> to support large, U.S. companies competing abroad and contribute to their success on the world stage.</li><li>Forum members’ <a href="https://fsforum.com/news/energy-and-large-banks-in-our-modern-economy">work</a> financing 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.</li></ul>&nbsp;<h2>Checking the Balance</h2>Members in the newsBank of America <a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2022/08/bank-of-america-announces-small-business-down-payment-grant-prog.html">announced</a> the launch of a Small Business Down Payment Grant Program to drive business growth and help create generational wealth opportunities for minority and women business owners. The program provides down payment grants on SBA 504 and 7(a) commercial real estate loans. Launching in select markets with plans to expand in 2023, the program will extend credit to historically disadvantaged small business borrowers and provide support to make purchasing commercial real estate more affordable.The Banker <a href="https://www.bnymellon.com/us/en/about-us/newsroom/company-news/bny-mellon-treasury-services-wins-the-bankers-global-transaction-bank-of-the-year-2022.html">recognized</a> BNY Mellon with four awards for the firm’s innovative work to streamline and transform transaction processes. The awards include 2022 Global Transaction Bank of the Year, Transaction Bank of the Year for North America, as well as top honors for Payments and for Trade Finance. Treasury Services received honors in the payments category for the second straight year for its ongoing work to transform the real-time and digital payments space.Two years after Citi launched its <a href="https://www.citigroup.com/citi/racial-equity/">Action for Racial Equity</a> commitment, the firm <a href="https://blog.citigroup.com/2022/09/action-for-racial-equity-two-years-later/">surpassed</a> the $1.1 billion investment goal in strategic initiatives working to help close the racial wealth gap. Since the launch, Citi has made important progress. Recent highlights include launching a special purpose credit program that will expand income eligibility and distribution of lending solutions to serve more diverse consumers, enlisting three minority depository institutions to take part in a $1.23 billion syndicated corporate loan and five Black-owned firms to syndicate a $2.5 billion bond issuance, and <a href="https://blog.citigroup.com/2022/09/citi-impact-fund-expands-to-500-million-doubling-down-on-the-double-bottom-line/">expanding</a> the Citi Impact Fund to $500 million.Goldman Sachs <a href="https://grantmakersforgirlsofcolor.org/resources-item/goldman-sachs-one-million-black-women-invests-500000-in-the-future-economy-lab-abundantly-investing-in-girls-of-color/">invested</a> half a million dollars in The Future Economy Lab, a joint lab between Grantmakers for Girls of Color and SecondMuse Capital. Goldman Sachs <a href="https://www.goldmansachs.com/our-commitments/sustainability/one-million-black-women/">One Million Black Women’s</a> investment will support Black girls and gender-expansive youth age 13 to 24, as well as industry experts, in co-creating and co-designing financial tools to advance racial equity and inclusive growth.Morgan Health, a business unit within JPMorgan Chase, <a href="https://www.jpmorganchase.com/news-stories/morgan-health-announces-new-investment-in-letsgetchecked">announced</a> a $20 million investment in LetsGetChecked, a global health care solutions company that provides clinical tools to conveniently and easily manage patients’ health from home. The LetsGetChecked platform plays a key role in reaching historically underserved individuals who often face significant financial or logistical barriers to routine and recommended testing. The investment aims to scale availability of accessible at-home health care solutions for early diagnosis, disease prevention, care management.Morgan Stanley <a href="https://www.morganstanley.com/press-releases/inaugural-global-cohort-multicultural-innovation-lab">announced</a> the eighth cohort of the&nbsp;<a href="https://cts.businesswire.com/ct/CT?id=smartlink&amp;url=https%3A%2F%2Fwww.morganstanley.com%2Fabout-us%2Fdiversity%2Fmulticultural-innovation-lab%23why-the-multicultural-lab&amp;esheet=52858647&amp;newsitemid=20220906005822&amp;lan=en-US&amp;anchor=Multicultural+Innovation+Lab&amp;index=1&amp;md5=94a3ce61f18b387efcb059ba42d13b40">Multicultural Innovation Lab</a>. The in-house accelerator program for technology and technology-enabled startups targets companies with multicultural or women founders or other C-suite members. Now in its sixth year and with 69 participating companies to date, the program is expanding globally for the first time, with participating companies in both the U.S. and in Europe, the Middle East and Africa.State Street CEO Ronald O’Hanley, along with President and Head of Investment Services Lou Maiuri, were named to the HERoes 2022 Top Advocate Executives list for their work in driving inclusion for women across the business. Yvonne Garcia, Chief of Staff to State Street Chairman and CEO, and Donna Milrod, Executive Vice President of State Street Corporation, were named to the Top Women Executives list.Wells Fargo <a href="https://newsroom.wf.com/English/news-releases/news-release-details/2022/Wells-Fargo-Foundation-awards-7.5-million-to-LISC-Houston-to-expand-homeownership-for-families-of-color/default.aspx">invested</a> $7.5 million in a new initiative launched by Local Initiatives Support Corporation Houston and the Harris County Homeownership Collaborative to expand homeownership opportunities for Black, Hispanic, and other underserved individuals and families. The donation comes from Wells&nbsp;Fargo’s&nbsp;Wealth Opportunity Restored Through Homeownership, or WORTH, initiative, a $60&nbsp;million national effort to address systemic barriers to homeownership for people of color.

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The Forum File, 2022 Edition #5

Dear reader,Welcome to the latest edition of The Forum File. In this edition, we are highlighting our firms’ work to remove barriers for historically underserved populations and expand access to banking services across the country to create a more inclusive economy.We hope you enjoy reading this edition and please do not hesitate to share your feedback.Kevin Fromer, President and CEO, Financial Services Forum&nbsp;<h2>Penny For Your Thoughts</h2>Gonzalo Luchetti, CEO of U.S. Personal Banking at Citi&nbsp;<h3>What is Citi doing to remove some of the barriers preventing low-income Americans from engaging in the financial system?</h3>This Summer, Citi bolstered our track record for leading on overdraft policy by completely eliminating all overdraft fees and returned item fees for our consumer banking customers. We already had some of the lowest overdraft fee revenues in relation to our size in the industry as a result of being a consistent leader in implementing overdraft practices to protect our clients. For example, we do not authorize ATM or point-of-sale debit transactions in cases when we know the money is not available and offer account packages like our industry-leading Access Account Package which provides automatic protection against overdrafts.We also made a significant enhancement to our direct deposit policies, recognizing peer-to-peer (P2P) payments as direct deposits that enable customers to qualify for checking account monthly service fee waivers. This change will offer workers in the gig economy critical savings as they manage their monthly finances and we will continue to explore additional ways we can make our banking products even more accessible and affordable for our customers.<h3>How is Citi helping expand financial access in areas where you don’t have a branch network?</h3>Through the Citi Community ATM Network, we provide nearly 622,000 customers of 31 participating Minority Depository banks and Community Development credit unions with access to about 2,200 Citibank ATMs to make cash withdrawals free, removing a barrier to financial access that disproportionately impacts low-income Americans. Additionally, our Affordable Access to Banking Initiative enables participating community partners the opportunity to offer our Bank On certified Citi Access Account Package, with Citi waiving monthly service fees and minimum balance requirements, to participants regardless of geographic location. We currently have partners such as the National Urban League and Local Initiatives Support Corporation, with more partners in the pipeline.&nbsp;&nbsp;Access to credit is a fundamental consumer need that has to be addressed in order to bridge the wealth gap. We are starting to build the onramps for consumers to feel well informed and credit ready through a credit education pilot that we are offering in partnership with a Community Development Financial Institution and Experian, to support their consumers, including minority business owners, and help consumers feel equipped to make the right credit decisions for themselves. We also continue to participate and lead in initiatives like the OCC-led Roundtable for Economic Access and Change (Project REACh) focused on extending credit to consumers with limited or no credit histories, again eliminating a key barrier for lower-income Americans as they look to enter the financial system and build wealth.<h3>What is the longer-term vision for building on the progress you’ve made so far?</h3>Through the launch of a <a href="https://www.wsj.com/articles/citigroup-joins-industry-effort-to-lend-to-people-without-credit-scores-11662174186">Special Purpose Credit Program (SPCP)</a>, Citi will further our support for borrowers in majority Black and Hispanic census tracts. We will help these borrowers both within and outside our branch footprint, to obtain affordable mortgage loans by permitting low-down payments, removing mortgage insurance requirements and expanding lender-paid assistance programs. Citi is also finalizing a Small Business SPCP (Q1 2023) for a pilot (REACh), which will support lending to women, minority and veteran-owned Businesses in the Los Angeles Metropolitan Area with plans to scale in the future.&nbsp;We know our work is not done. We have built a dedicated team to drive an integrated strategy for Financial Inclusion and Racial Equity within our U.S. Personal Banking business, helping us continue to enhance our services and products, and build new partnerships across the country to increase access and promote financial inclusion and racial equity for everybody.&nbsp;<h2>Value Add</h2>&nbsp;<figure class="image"><img src="https://fsforum.com/a/media/istock-1347065753.jpg"></figure>&nbsp;Over the last two years, gig workers represented about 35% of the U.S. workforce, with more than $1.4 trillion in payments – 40% of which were processed through PayPal. Often, though, these payments aren’t recognized as employment-related direct deposits, preventing these workers from taking advantage of accounts that waive certain fees with direct deposit enabled.In July, Citi became the first major bank to recognize these peer-to-peer payments from employers as direct deposits, waiving monthly service fees for the Citi Access and Basic banking accounts when customers receive these P2P payments using the ACH platform in Cash App, Google Pay, PayPal, Pop Money, Venmo and Zelle.These changes give workers in the gig economy critical savings as they manage their monthly finances. They also show the spirit with which we are embracing the opportunity to adapt to changes in how our customers manage their lives, while promoting access and inclusion in the financial system for low-income workers in the U.S.<h2>&nbsp;</h2><h2>Capital Gains</h2>What we’re doing in Washington&nbsp;&nbsp;The Forum <a href="https://fsforum.com/news/tiffany-haas-selected-as-head-of-forum-government-affairs">announced</a> the selection of Tiffany Haas as Head of Government Affairs. Haas has served as the Forum’s Co-Head of Government Affairs since September 2018. “I am delighted to announce Tiffany’s selection to lead our government affairs work,” Forum President and CEO Kevin Fromer said. “Tiffany has been an essential member of the Forum team for the past four years, serving our organization and its members with the utmost level of skill, professionalism, and dedication. She is a tremendous colleague, and I know she will excel in this new role.”The Forum <a href="https://fsforum.com/news/forum-welcomes-chip-bartlett-to-government-affairs-team">announced</a> that Chip Bartlett has joined the organization as Vice President of Government Affairs. “Chip has a wealth of financial policy knowledge and experience gleaned from work in the public and private sectors,” Forum President and CEO Kevin Fromer said. “We are thrilled for him to join the Forum team and for him to represent the nation’s largest banks in Washington.” Bartlett previously focused on financial legislative and regulatory priorities while serving as the Vice President of Congressional Affairs at the Consumer Bankers Association and Vice President of Congressional Relations at the Independent Community Bankers of America.&nbsp;Forum President and CEO Kevin Fromer <a href="https://www.linkedin.com/posts/kevin-fromer-73aa7017_this-summer-academics-policymakers-and-activity-6973260891853090816-7KiP?utm_source=share&amp;utm_medium=member_desktop">highlighted</a> some of the key themes from the inaugural Financial Services Forum Summit to keep in mind as Washington heads into a busy Fall. The Summit featured discussions from industry leaders, policy experts, and government officials. Main themes that emerged from the event include the resilience of the banking sector, the need to address unanswered questions related to large bank regulation in the near term, the importance of coordination and a broad government strategy in addressing climate change, and the necessity of regulatory clarity in the digital assets space. Click <a href="https://vimeo.com/financialservicesforum">here</a> to see key moments and full recordings of each panel.<h2>&nbsp;</h2><h2>Our Two Cents</h2>Research from the Forum&nbsp;&nbsp;The BankNotes Blog Spotlighted:<ul><li>The <a href="https://fsforum.com/news/past-due-notice-addressing-leverage-capital-for-large-banks-to-restore-treasury-market-functioning">need</a> to move forward on supplementary leverage ratio reform to ensure it plays a role as a backstop without unnecessarily restricting credit to any sector of the economy.</li><li>The <a href="https://fsforum.com/news/standing-apart-from-the-crowd-gsib-capital-liquidity-and-the-economy">robust capital and liquidity levels</a> of Forum members and the implications of current capital levels for current and future economic growth.</li></ul>&nbsp;<h2>Checking the Balance</h2>Members in the news&nbsp;Atrium Health <a href="https://atriumhealth.org/about-us/newsroom/news/2022/transformational-gift-from-bank-of-america-supports-program-aimed-at-reducing-health-disparities">announced</a> a $10 million gift from Bank of America to establish “Meaningful Medicine,” a program uniting the best innovations within health care, social impact and workforce development to directly target health equity and economic mobility goals within Charlotte. Meaningful Medicine will launch by implementing Atrium Health Levine Children’s school-based virtual care in 20 elementary Charlotte-Mecklenburg Schools during the 2022-23 school year. Within three years, the program will expand to offer virtual care at 50 CMS schools and behavioral health telemedicine at 31 schools. &nbsp;&nbsp;BNY Mellon <a href="https://www.bnymellon.com/us/en/about-us/newsroom/company-news/bny-mellon-joins-white-house-economic-opportunity-coalition-as-founding-member.html">announced</a> its role as a founding member of the Economic Opportunity Coalition, an initiative led by the Biden-Harris Administration to catalyze and align public and private investments that will address economic disparities and accelerate economic opportunity in underserved communities. The announcement is the latest example of BNY Mellon’s commitment to helping underserved communities and responding to some of today’s greatest challenges, including racial inequality and climate change.In a recent report, Citi’s Global Chief Economist Nathan Sheets and Global Head of Trade Chris Cox <a href="https://www.citivelocity.com/citigps/global-supply-chains-2-2/">examined</a> the topic dominating trade talk: how supply chains are shifting as the world reacts to the new realities resulting from the pandemic and the war in Ukraine.Goldman Sachs <a href="https://www.goldmansachs.com/media-relations/press-releases/2022/ombw-announces-black-women-impact-grants.html">announced</a> 50 recipients of the Black Women Impact grants program, part of its One Million Black Women initiative, to fund Black women-led and Black women-serving nonprofits. The 50 organizations were selected based on their established efforts to deliver innovative and transformative solutions to narrow opportunity gaps faced by Black women. A total of $10 million will be invested through the multi-year program.&nbsp;JPMorgan Chase <a href="https://www.jpmorganchase.com/news-stories/jpmc-commits-30mil-to-support-historically-black-colleges-universities">announced</a> an expanded five-year, $30 million commitment to the financial and career success of students at Historically Black Colleges and Universities. This commitment expands on the firm’s <a href="https://www.jpmorganchase.com/impact/people/advancing-black-pathways">Advancing Black Pathways </a>initiative, which launched in 2019 to chart clearer pathways toward economic success and empowerment within the Black community.&nbsp;Morgan Stanley <a href="https://www.morganstanley.com/articles/uk-future-generation-scholarship-program-diversity">welcomed</a> its initial class of interns who were selected to be a part of the Future Generation Scholarship program. The scholarship provides tuition assistance and career-development support for students who are from ethnic minority and/or socially mobile backgrounds. The Future Generation Scholarship Program is one in a series of diversity initiatives championed and funded by Morgan Stanley’s <a href="https://www.morganstanley.com/about-us/diversity/institute-for-inclusion">Institute for Inclusion</a>, which was established in November 2020 to support underserved communities and drive workplace diversity and inclusion, among other equality-driven goals.State Street <a href="https://newsroom.statestreet.com/press-releases/press-release-details/2022/State-Street-Partners-with-Latinx-Firms-to-Underwrite-750-Million-of-Senior-Notes/default.aspx">partnered</a> with four Latinx-owned firms to underwrite $750 million of senior notes. This issuance demonstrates State Street’s ongoing and strong commitment to increasing Latinx representation and opportunities across the industry, and is the third such offering this year where the underwriting syndicate has been structured to amplify the firm’s inclusion, diversity and equity strategy.Wells Fargo <a href="https://newsroom.wf.com/English/news-releases/news-release-details/2022/Wells-Fargo-Foundation-Aims-to-Grow-Diverse-Housing-Developers-with-40-Million-Donation/default.aspx">announced</a> Growing Diverse Housing Developers, a $40 million grant initiative focused on expanding the growth and success of real estate developers of color, including Black- and Latino-owned firms, as well as increasing the supply of affordable homes across the country.

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The Forum File, 2022 Edition #4

The Forum File

CONTACT: Barbara Hagenbaugh(202) 471-0436bhagenbaugh@fsforum.com&nbsp;“There is no compelling case to increase capital requirements at the largest banks,” Forum CEO saysWashington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today on large bank capital:“We look forward to seeing the conclusions drawn from the Federal Reserve’s holistic capital review.&nbsp;The banking system has evolved significantly from the financial crisis.&nbsp;Capital levels at our largest banks are at historic highs. Indeed, the nation’s largest banks have performed well in repeated government stress tests – which assume no government support – and in the real-life stress test of the pandemic. &nbsp;“There is no compelling case to increase capital requirements at the largest banks, which would raise the costs of lending for families and businesses, hinder U.S. economic growth, and further push activity outside of the regulated financial sector. Regulators must carefully consider the economic impact of capital requirements, because they affect the whole economy, not just banks.”&nbsp;&nbsp;Background:Capital requirements for the eight U.S.-based Global Systemically Important Banks (GSIBs) that comprise the Forum have increased substantially and are continuing to rise. Since 2009, Forum members have increased their Tier 1 capital by 49 percent from $655 billion to $979 billion. This strength positioned them during and after the pandemic – a real-life stress test – to support individuals, small businesses, major companies, and communities across the country.Read more about capital at the nation’s largest banks in this <a href="https://fsforum.com/a/media/capital-and-the-nation%E2%80%99s-largest-banks.pdf">fact sheet</a> and in the Forum’s BankNotes <a href="https://fsforum.com/news/category/banknotes-blog/1/9">blog</a> series, including the <a href="https://fsforum.com/news/don-t-paint-the-house-before-finishing-the-roof-basel-iii-finalization-and-the-large-bank-capital-regime">latest post</a>, <a href="https://fsforum.com/news/don-t-paint-the-house-before-finishing-the-roof-basel-iii-finalization-and-the-large-bank-capital-regime">Don’t Paint the House Before Finishing the Roof: Basel III Finalization and the Large Bank Capital Regime</a>.&nbsp;###&nbsp;The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of 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. &nbsp;Follow us on Twitter <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Capital Requirements Affect the Entire Economy, Not Just Banks

CONTACT: Barbara Hagenbaugh(202) 471-0436bhagenbaugh@fsforum.com&nbsp;No deficiencies cited by regulators in largest U.S. banks’ living wills&nbsp;Washington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today after the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) issued their findings on living wills submitted by Forum member institutions in mid-2021:&nbsp;“The nation’s largest banks are strong, resilient, and meeting the requirement to have effective resolution plans in place, one of a number of stringent post-crisis reforms. The agencies found no deficiencies in their review of the firms’ resolution plans, which reaffirms that the firms have a strategy in place to be resolved in an orderly way, without cost to taxpayers. The agencies have repeatedly reached the same conclusion during the past decade, further demonstrating the ongoing commitment of the largest U.S. banks to the safety of the financial system.“The nation’s largest banks are vital to the economy of the United States and to U.S. international competitiveness. Forum members and federal regulators have worked to help solidify the strength and safety of our financial system since the financial crisis. This strength was on display during the real-life stress test of the pandemic, in which the nation’s largest banks showed that they are positioned to continue to support the economy even during a significant and sudden economic downturn.”&nbsp;Background: The Dodd-Frank Act requires that large financial institutions submit resolution plans, commonly known as living wills, describing the company's strategy for rapid and orderly resolution in bankruptcy in the event of material financial distress or failure of the company.The Federal Reserve and FDIC in 2019 <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20191028b.htm">amended</a> the process for living will submissions requiring the largest banks to submit plans with a limited, targeted scope every other submission, noting: “The largest firms have improved their resolution strategies and governance, refined their estimates of liquidity and capital needs in resolution, and simplified their legal structures. These changes have made the firms substantially more resilient.”The Federal Reserve and FDIC—the agencies charged with reviewing and assessing living wills—today <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20221123a.htm">said</a> they did not identify any deficiencies in the 2021 targeted submissions by Forum member institutions.&nbsp; &nbsp;&nbsp;To learn more about the advancements by Forum member institutions to promote financial stability, read “<a href="https://fsforum.com/a/media/regulatory-reality.pdf">The Regulatory Reality</a>.” &nbsp;&nbsp;###&nbsp;The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of 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. &nbsp;Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on Twitter <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Forum Comments on Positive Assessment from Federal Reserve and FDIC on Resolution Plan Review

CONTACT: Brigid Richelieu(202) 660-2569brichelieu@fsforum.com&nbsp;FDIC survey results reflect the banking sector’s ongoing commitment to financial inclusion, Forum CEO saysWashington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today in response to the Federal Deposit Insurance Corporation’s (FDIC) <a href="https://www.fdic.gov/news/press-releases/2022/pr22075.html">2021 National Survey of Unbanked and Underbanked Households:</a>“Today’s results from the FDIC’s survey, which found that the share of unbanked households has dropped to historic lows, marks a significant step forward. Financial inclusion is an important goal shared by all of our members, and today’s encouraging results reflect our members’ ongoing commitment to that goal.“The nation’s largest banks have long been on the frontlines in the effort to bring unbanked and underbanked Americans into the financial mainstream, serving as founding lenders in a pilot program with Cities for Financial Empowerment (CFE) to offer BankOn accounts and partnering with CFE to launch Financial Empowerment Centers in cities across the country. Forum members are also working with the Office of the Comptroller of the Currency on Project REACh to promote financial inclusion through greater access to credit and capital.“We welcome today’s results, and our members remain committed to bringing more people into the banking system.”To learn more about how the nation’s largest banks are working to bring those outside of banking in, click <a href="https://fsforum.com/a/media/serving-the-unbanked-.pdf">here</a>.&nbsp;###&nbsp;The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of 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. &nbsp;Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on Twitter <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

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The Forum supports proposals that would require public companies to annually disclose the gender, race, ethnic, and veteran status of their boards of directors, nominees, and senior executives. Diversity of corporate boards is an area of focus for our institutions and is critically important to investors and other stakeholders.

Board diversity ensures representation of differing experiences and perspectives and allows for unique approaches to solve complex problems. Our members recognize that board diversity bolsters competitiveness around the world, helps foster a sustainable and inclusive economy, and leads to better results for consumers, clients, and communities.


Diversity, Equity and Inclusion

Forum Statement on FDIC’s Unbanked Households Survey

Press Releases

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Kevin Fromer

President and Chief Executive Officer

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

This op-ed was featured in <a href="https://morningconsult.com/opinions/strength-of-large-u-s-banks-means-its-time-to-rely-on-rigorous-capital-distribution-process/">Morning Consult</a>.&nbsp;<blockquote>Later this week, the Federal Reserve will issue results of its latest round of stress tests, offering an update on the health and safety of the largest banks in the country. This assessment marks the third round of stress tests the government has conducted in a year to measure the capital adequacy of large U.S. banks.</blockquote>These results will herald the full return to the government’s normal capital distribution oversight <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210325a.htm">process</a>, which was halted in 2020 due to the uncertain economic effects of the pandemic. Given the strength of the nation’s largest banks and the rapid improvement in the economy, it is clearly time to rely on the established and rigorous regulatory process, which allows banks to return excess capital to investors across the country. This return to regular order will support the economy as we build a strong, inclusive recovery.Capital distributions are expected by investors in any large corporation. Companies in a variety of&nbsp;<a href="https://www.wsj.com/articles/companies-are-flush-with-cashand-ready-to-pad-shareholder-pockets-11621157406">industries</a>&nbsp;routinely distribute portions of their earnings to investors — it is how American companies attract investment so that they can grow, create jobs, expand services and better support the economy.Despite what critics would have you believe, the capital distribution process is not a zero-sum game. Share distributions&nbsp;<a href="https://finance.yahoo.com/news/tax-cuts-fuel-stock-buyback-spike-130545937.html?acid=twitter_yfsocialtw_l1gbd0noiom&amp;ncid=twitter_yfsocialtw_l1gbd0noiom&amp;guccounter=1">complement</a> — not replace — the investments that banks make in their communities, workers, operations and businesses. Only safe and highly capitalized banking institutions can even consider buybacks or dividends.What’s more, unlike every other industry, large financial institutions face higher regulatory scrutiny and approval to buy back shares or to issue dividends.This year, large banks must pass a strenuous stress test to demonstrate they maintain a strong capital position and can support the economy, even during a significant downturn. They must further satisfy several different regulatory capital&nbsp;<a href="https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200304a2.pdf">requirements</a>&nbsp;each quarter to continue making planned buybacks and dividends. Then, and only then, are banks able to distribute capital.In the most recent test, which the Federal Reserve completed in&nbsp;<a href="https://www.federalreserve.gov/publications/files/2020-dec-stress-test-results-20201218.pdf">December</a>, the average post-stress capital ratio for the U.S. Global Systemically Important Banks was 9.7 percent, significantly larger than that of other U.S. banks subject to the stress tests and more than twice the minimum requirement of 4.5 percent.The largest U.S. banks entered the global pandemic in a strong position and they acted quickly to&nbsp;<a href="https://fsforum.com/our-impact/covid-19-response">support</a>&nbsp;customers, small businesses, employees and the communities in which they operate. They also&nbsp;<a href="https://fsforum.com/news/financial-services-forum-statement-on-share-buybacks">suspended</a>&nbsp;their share buybacks — which account for the majority of their capital distributions — and aggressively reserved for potential losses. Importantly, large banks’ strength and scale allowed them to significantly support the economy.In 2020, the nation’s largest banks increased their provision of&nbsp;<a href="https://fsforum.com/a/Credit_ad3853a06e/Credit_ad3853a06e.pdf">credit</a>&nbsp;by 10 percent, helping families, small businesses, large employers and the government. They accepted a massive surge in deposits and facilitated loans to nearly 850,000&nbsp;<a href="https://fsforum.com/a/COVID_19_Response_b55baf7fc3/COVID_19_Response_b55baf7fc3.pdf">small businesses</a>&nbsp;through the Paycheck Protection Program. They also committed significant resources to communities across the country, creating or preserving more than 158,000 affordable&nbsp;<a href="https://fsforum.com/a/Committed_to_Affordable_Housing_2021_4c59c48264/Committed_to_Affordable_Housing_2021_4c59c48264.pdf">housing</a>&nbsp;units, and supported their nearly 758,000 employees by giving them extra time off, paying for child and elder care and providing economic incentives.The largest banks have also been strong&nbsp;<a href="https://fsforum.com/our-impact/supporting-underserved-communities">supporters</a>&nbsp;of historically underserved communities. In addition to the work they are doing to promote lending in minority neighborhoods, they are investing in mission-driven financial institutions so that they can succeed and serve diverse and low- and moderate-income communities. From 2015 to 2020, the largest banks&nbsp;<a href="https://fsforum.com/a/cdfifactsheetfinal2021_861e28ce56/cdfifactsheetfinal2021_861e28ce56.jpeg">invested</a>&nbsp;$9 billion in Community Development Financial Institutions, and they have also&nbsp;<a href="https://fsforum.com/a/MDI_One_Pager_6a4a12345f/MDI_One_Pager_6a4a12345f.pdf">committed</a>&nbsp;more than $500 million to Minority Depository Institutions, in some cases investing directly in the MDIs to support their long-term wellbeing.The largest banks are committed to supporting their employees and the communities they serve. These institutions can and will continue to provide this support while distributing&nbsp;capital.It’s important to remember that the benefits of buybacks and dividends to the economy go far beyond the shareholders. More than half of all U.S. households own stocks, either directly&nbsp;or indirectly, according to the&nbsp;<a href="https://www.federalreserve.gov/econres/scfindex.htm">Federal Reserve</a>. Moreover, stock holdings are most concentrated among households headed by a retiree and dependent on dividends to meet their financial needs. Therefore, money returned to shareholders recirculates throughout the economy.&nbsp;It is our banks’ responsibility to those teachers, first responders, veterans and small businesses who invest in them to always use capital in the highest and most efficient way possible.As Federal Reserve Chairman Jerome Powell&nbsp;<a href="https://www.govinfo.gov/content/pkg/CHRG-115shrg32517/pdf/CHRG-115shrg32517.pdf">said</a>: “When a company buys back its shares or pays higher dividends, the resources do not disappear. Rather, they are redistributed to other uses in the economy. For instance, shareholders may decide to invest the windfall in another company, which may in turn make productivity-enhancing investments. Or they may decide to spend the windfall on goods and services that are produced by other companies, who may in turn hire new workers. In these ways, stock repurchases would also be likely to boost economic growth.”The nation’s largest banks are committed to serving our country and to building an economic recovery that supports everyone. They have been through a real-life stress test during the past year and have shown that they are safe, strong, and are a key source of support for the economy. Government oversight of share distributions by the largest U.S. banks is rigorous, and ensures the continued strength of the financial system. The fact that banks have such excess capital to reinvest in the form of buybacks and dividends is a promising sign for the economy. It is now time to rely upon a normal process of assessing our institutions, and ensuring that they may support a durable, inclusive recovery.&nbsp;Kevin Fromer is president and CEO of the Financial Services Forum, which represents the eight largest, most diversified U.S. banking institutions, and previously served as&nbsp;the Assistant Secretary of the Treasury for Legislative Affairs from 2005 to 2009.&nbsp;

Op-ed: Strength of Large U.S. Banks Means It’s Time to Rely on Rigorous Capital Distribution Process

This op-ed was featured in <a href="https://www.americanbanker.com/opinion/capital-relief-is-good-for-big-banks-and-the-economy">American Banker's BankThink</a>.&nbsp;<blockquote>The nation’s largest banks have been instrumental in supporting the economy through the coronavirus pandemic, providing vital assistance to consumers and businesses and facilitating critical financing from government programs.To ensure the banking industry can be a key source of support during the crisis, regulators rightly made temporary and targeted adjustments to certain regulations.</blockquote>Yet, some critics including in a recent&nbsp;<a href="https://www.americanbanker.com/opinion/dont-weaken-the-g-sib-surcharge">BankThink</a>&nbsp;op-ed, have shown a clear misunderstanding of big bank capital levels and the objective of the Federal Reserve in navigating one of the most serious economic crises to ever hit the U.S. and global economy.The author argues that regulators “gutted” large bank capital by temporarily excluding deposits at the Federal Reserve and U.S. Treasuries from the supplementary leverage ratio’s (SLR) risk-insensitive measure of total exposure, which determines the amount of capital required by the SLR. A few points should be noted in response.First, regulators have long held that risk-insensitive leverage capital requirements are intended to be a backstop to risk-based capital requirements. Prior to the crisis, the minimum capital requirement for a risk-based capital measure, called Tier 1, was 4% of risk-weighted assets. Today, that minimum stands at 6%, a 50% increase.What’s more, over the past decade banks have significantly improved both the quality and quantity of capital maintained. Financial Services Forum members, for instance, have grown their capital base by&nbsp;<a href="https://fsforum.com/a/forum_value_and_resiliency_2020q1_1_f835ef3ee5/forum_value_and_resiliency_2020q1_1_f835ef3ee5.pdf">$260 billion</a>&nbsp;and substantially raised capital levels as a proportion of the risk-weighted asset base.Regulators rightly made a temporary change to the SLR standard in the pandemic to help ensure that risk-insensitive leverage requirements do not move to the fore and become the binding capital constraint. This would further distress capital markets and the ability of banks to provide credit to businesses and households during an unprecedented economic disruption.Second, large banks are currently bound by the Federal Reserve’s new capital policy announced in late June with this year’s stress test results. All large banks are prohibited from making any share repurchases through the third quarter and dividend payouts are frozen at previous levels.Accordingly, it is hard to understand how large bank capital will decline significantly as the Federal Reserve has actively taken steps requiring banks to conserve capital. These measures outweigh any potential impact that the temporary change to the SLR could have.Some critics also maintain that the finalization earlier this year of the&nbsp;<a href="https://www.americanbanker.com/news/fed-finalizes-new-capital-buffer-ahead-of-2020-stress-tests#:~:text=The%20final%20SCB%20%E2%80%94%20which%20the,severely%20adverse%E2%80%9D%20stress%20test%20scenario.">stress capital buffer (SCB) rule</a>&nbsp;— which was first introduced during the Obama administration and ties large bank capital requirements to stress testing — somehow represents a big bank giveaway.Yet the Federal Reserve’s&nbsp;<a href="https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200304a1.pdf">analysis</a>&nbsp;showed that the SCB will have the effect of raising capital for global-systemically important banks (G-SIBs) by roughly $46 billion on average, while at the same time lowering capital requirements for smaller banks. Given that the analysis shows the SCB final rule raises capital for G-SIBs, it is difficult to understand how one would assert that the SCB represents a weakening of the large bank capital regime.Also, this year the Fed opted not to set bank capital distribution policy with regard to the SCB. Rather, the Fed is using a new “sensitivity analysis” to determine bank capital distributions.This year’s sensitivity analysis found that 75% of all large banks subject to the stress tests — a universe that goes well beyond the G-SIBs — would maintain capital levels above the minimum requirement.In the parlance of the previous stress testing regime, most banks actually passed the stress tests, but are still being required to conserve capital per the Fed’s new capital distribution policy. Accordingly, the suggestion that somehow large banks are either not well-capitalized or are shedding capital simply does not add up.All of the capital modifications announced by the Fed are temporary and explicitly designed to deal with the coronavirus crisis to help ensure that banks of all sizes can continue to support the economy in this time of great need.<blockquote>Data and existing research convincingly show that large banks have been&nbsp;<a href="https://www.fsforum.com/types/press/unprecedented-increase-in-large-bank-lending-to-help-businesses-through-the-recovery/">playing an outsized role</a>&nbsp;in supporting the U.S. economy. Indeed,&nbsp;<a href="https://www.nber.org/papers/w27256">research</a>&nbsp;from Boston College and Federal Reserve staff further documents that the bulk of corporate lending during the pandemic has come from large banks, showing these institutions have risen to the occasion during such trying times.</blockquote>The Federal Reserve and other regulators are wisely and judiciously making temporary adjustments to certain capital rules to ensure that formulaic and risk-blind capital requirements do not unnecessarily cinch the flow of credit, which is so crucial to managing through this crisis. The Fed’s modification of the SLR in these exigent times is a shining example of what a good regulator should do in a crisis.It is not a “rollback” or “weakening” of anything. Rather, it illustrates the central bank’s resolve in putting the economy and people ahead of inflexible rules.As the economic and public health data clearly show, the nation is not out of this pandemic yet. Regulators should continue to prudently modify regulations that risk unnecessarily crimping private credit expansion, which would present even more challenges to an already unstable economic recovery.&nbsp;<a href="https://www.americanbanker.com/author/sean-campbell">Sean Campbell</a>Sean Campbell is chief economist and head of policy research at the Financial Services Forum.

BankThink Op-ed: Forum Head of Research Explains Why Targeted Capital Relief Makes Sense for Large Banks & an Economy in Crisis

Opinion

Letters

Comments in Response to the Second Consultation on the Prudential Treatment of Cryptoasset Exposures

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Forum members recognize that climate change poses risks to the world’s economy.
The transition to a low-carbon economy will occur over several decades and requires collaboration between a wide range of industries and government. The Forum advocates for appropriate policies and international cooperation to ensure that climate policies and regulations related to the financial industry are based on science, risk, and sound methodologies.


Climate Finance

FSF - SEC Climate Proposal Comment Letter

Principles for Climate-Related Financial Risk Management for Large Financial Institutions

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Fact Sheet

Capital and the Nation’s Largest Banks

BNY Mellon

External Link

BNY Mellon Hires Veteran-Owned Firms to Participate in a $750 Million Senior Bank Note Issuance in Honor of National Veterans and Military Families Month

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<ul><li>BNY Mellon&nbsp;started the <a href="https://www.bnymellon.com/us/en/about-us/diversity-inclusion.html">IMPACT</a> network to help cultivate a diverse and inclusive workplace by promoting the recruitment, retention, professional development and advancement of multicultural employees.</li><li>Morgan Stanley&nbsp;has established an ‘<a href="https://www.morganstanley.com/articles/diversity-hiring-black-banking-professionals">Experienced Professionals Program</a>’ to recruit Black professionals with two or more years of post-graduate or work experience for full-time positions to help expand the talent pool of Black financial professionals.</li><li>State Street&nbsp;helps create a diverse workforce through its <a href="https://www.statestreet.com/values/social-consciousness.html">Global Inclusion program</a>, which offers mentoring, events and performance goals focused on diversity and inclusion, and employee networks.</li></ul>

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Diverse Talent

We are building a pipeline of diverse talent by expanding the pool of diverse managers and ensuring an inclusive workplace.

<ul><li>Bank of America&nbsp;has a Global Diversity &amp; Inclusion Council chaired by CEO Brian Moynihan, which leads D&amp;I efforts and works with the management team setting related goals for the company.</li><li>Citi&nbsp;has named members of the CEO’s leadership team as co-chairs of its affinity groups, which set and reinforce the company’s diversity priorities and goals.</li><li>JPMorgan Chase&nbsp;<a href="https://www.jpmorganchase.com/news-stories/jpmc-announces-brian-lamb-as-global-head-of-diversity-inclusion">named</a> a new Global Head of Diversity &amp; Inclusion in April 2020, a newly created position that reports directly to the firm’s co-presidents.</li><li>Wells Fargo has created a new expanded diversity role reporting directly to the CEO, with a broad mandate to drive diversity and inclusion in both the firm’s workplace and business.</li></ul>

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Leadership Roles

Our institutions are establishing and empowering Diversity & Inclusion leadership roles dedicated to advancing diversity, inclusion and equity in the workplace in partnership with chief executives.

<ul><li>Bank of America&nbsp;offers Employee Networks that provide teammates from diverse backgrounds opportunities to connect with each other, develop leadership skills, and build strong ties with the communities they serve.</li><li>JPMorgan Chase&nbsp;has multiple <a href="https://careers.jpmorgan.com/us/en/about-us/diversity">Business Resource Groups</a> (BRGs) that help foster networks of employees and connect women and minority employees with each other to provide mutual support and sharing.</li><li>Morgan Stanley&nbsp;has multiple <a href="https://www.morganstanley.com/people-opportunities/enetworking">Employee Networks</a> designed to enhance employee engagement, deliver substantive content, create a framework for cross-business unit connectivity and idea-sharing, and advance the firm’s overall culture of inclusion.</li></ul>

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Employee Resource Groups

We have launched and expanded our Employee Resource Groups (ERGs) and other affinity groups to support employees and create conditions for them to succeed.

<ul><li>Bank of America&nbsp;has created unconscious bias trainings and offers diversity &amp; inclusion training.</li><li>Citi trains all hiring managers and Human Resources employees on unconscious bias.&nbsp;</li><li>JPMorgan Chase&nbsp;requires all employees to participate in unconscious bias and diversity &amp; inclusion training.</li><li>Wells Fargo&nbsp;requires live anti-racism manager training and has developed a series of educational sessions in which employees can share with their colleagues their personal stories and perspectives on the realities of racism in the U.S.</li></ul>

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Employee Trainings

We are creating and offering training focused on concepts like anti-racism, unconscious bias, and social justice.

<ul><li>Bank of America&nbsp;has committed to hiring 10,000 individuals from low- and moderate-income communities by 2023.</li><li>Citi has set a goal of having 30% Black and Hispanic/Latinx colleagues in its U.S. analyst and associate programs.</li><li>Goldman Sachs&nbsp;<a href="https://www.goldmansachs.com/media-relations/press-releases/current/update-on-inclusion-and-diversity.html">announced</a> a plan to, by 2025, achieve a representation among its vice presidents that equates to 40 percent women globally, 7 percent Black professionals in the Americas and UK, and 9 percent Hispanic/Latinx professionals in the Americas.</li><li>JPMorgan Chase&nbsp;has committed to hiring 4,000 Black students in full-time positions, apprenticeships and internships over the next five years.</li><li>State Street&nbsp;has <a href="https://www.statestreet.com/values/inclusion-diversity/diversity-goals.html">set</a> three- and five-year goals for achieving higher percentages of employees of color in SVP, MD, and VP positions across the firm.</li><li>Wells Fargo&nbsp;has committed to doubling the number of Black employees in leadership positions over the next five years.</li></ul>

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Hiring Commitments 

Our institutions have established hiring commitments to diversify our workforces.

**Our commitment to diversity, equity and inclusion**

Promoting Diversity, Equity and Inclusion

Closing the Wealth Gap by Investing in Communities

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<ul><li>Bank of America is the largest private investor in Community Development Financial Institutions (CDFIs) in the United States.&nbsp; The company provides capital to more than 250 CDFIs across all 50 states, which supply affordable, responsible loans and technical assistance to low-income and other underserved clients and communities.&nbsp;Bank of America’s portfolio of loans, deposits and investments to CDFIs exceeds $2 billion. Additionally, as part of its $1 billion commitment to closing the racial wealth gap, the bank has committed $50 million to support MDIs.</li><li>Citi has provided $173 million in capital, administered over $886 million in financing, and committed more than $79 million in philanthropic funding to more than 80 CDFIs across the country since 2015. The bank has also made its ATM network available free of charge to clients of nearly 30 MDIs and CDFIs – providing their customers with convenience and nearly $1 million in savings.</li><li>Goldman Sachs&nbsp;provided $774.5 million to eight different CDFIs between 2016 and 2020.</li><li>JPMorgan Chase&nbsp;has made 64 loans totaling more than $870 million to CDFIs and invested more than $1.4 billion in 49 different CDFIs through the New Markets Tax Credit program since 2015. Additionally, from 2015 to 2019 the firm provided 1,001 grants to 145 CDFIs totaling $194 million and continues to mentor and advise select MDIs and CDFIs to help them achieve their future success.</li><li>Morgan Stanley&nbsp;has provided $3.6 billion in investment in 41 CDFIs and $30.5 million in investment in three MDIs between 2016 and 2020. Additionally, the firm has <a href="https://www.morganstanley.com/press-releases/morgan-stanley-announces--10-million-to-support-minority-deposit">committed</a> $10 million in grants supporting MDIs.</li><li>Wells Fargo&nbsp;has invested $847 million in 305 unique CDFIs through grant and debt capital since 2015. Additionally, the bank has <a href="https://stories.wf.com/wells-fargo-announces-seeking-commit-50-million-capital-minority-depository-institutions/">committed</a> to investing up to $50 million in capital for MDIs.</li></ul>

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Supporting CDFIs and MDIs

We are supporting hundreds of Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) by providing over $8.5 billion in capital and financing between 2016 and 2020.

<ul><li>Bank of America&nbsp;in 2020&nbsp;<a href="https://newsroom.bankofamerica.com/press-releases/bank-america-announces-four-year-1-billion-commitment-supporting-economic">committed</a> $1 billion over four years to help local communities address economic and racial inequality. The firm has also <a href="https://newsroom.bankofamerica.com/press-releases/community-development/smithsonian-announces-race-community-and-our-shared-future#:~:text=Bank%20of%20America's%20%2425%20million,economic%20opportunity%20in%20minority%20communities.">committed</a> an additional $25 million to the Smithsonian to fund its Race, Community and Our Shared Future initiative, <a href="https://newsroom.bankofamerica.com/press-releases/corporate-philanthropy/bank-america-expands-support-boys-girls-clubs-america-1">provided</a> a $1 million grant to the Boys &amp; Girls Clubs of America, and made a $22.1 million <a href="https://newsroom.bankofamerica.com/press-releases/corporate-philanthropy/bank-america-expands-support-boys-girls-clubs-america-1">investment</a> in 2020 Neighborhood Builders and Neighborhood Champions in Support of Local Organizations.&nbsp; &nbsp;&nbsp;</li><li>BNY Mellon&nbsp;has <a href="https://www.bnymellon.com/us/en/about-us/newsroom/company-news/bny-mellon-commits-20-million-to-fund-the-future-workforce.html">committed</a> $20 million to community colleges and a select group of local and national organizations to support workforce training programs in traditionally underrepresented minority groups and communities. Additionally, the bank made an initial pledge of $1.5 million to organizations including My Brother’s Keeper, the NAACP Legal Defense and Education Fund, the Southern Poverty Law Center, the National Network for Safe Communities and the Vera Institute of Justice.</li><li>Citi <a href="https://www.citigroup.com/citi/news/2020/200923a.htm">launched</a> more than $1 billion in strategic initiatives in 2020 aimed at closing the racial wealth gap. The bank also <a href="https://www.citigroup.com/citi/news/2020/200117a.htm">launched</a> the $150 million Citi Impact Fund to make equity investments in ‘double bottom line’ private sector companies, with a focus on women and minority owned businesses.</li><li>Goldman Sachs&nbsp;has launched the One Million Black Women <a href="https://www.goldmansachs.com/our-commitments/sustainability/one-million-black-women/index.html">initiative</a>, a $10 billion investment initiative to advance racial equity and economic opportunity by investing in Black women with the goal of impacting the lives of at least 1 million Black women by 2030. It has also <a href="https://www.goldmansachs.com/media-relations/press-releases/current/gs-fund-for-racial-equity.html">created</a> the Goldman Sachs Fund for Racial Equity, which launched with $10 million – building on the more than $200 million the firm has granted over the past decade to organizations serving communities of color – and aims to support organizations addressing racial injustice, structural inequity and economic prosperity.</li><li>JPMorgan Chase&nbsp;in 2020 <a href="https://www.jpmorganchase.com/news-stories/jpmc-commits-30-billion-to-advance-racial-equity">committed</a> $30 billion to advance racial equity over the next five years through growing Black- and Latinx-owned businesses, improving financial health and access to banking in Black and Latinx communities and accelerating investment to build a more diverse and inclusive workforce.</li><li>Morgan Stanley&nbsp;<a href="https://www.morganstanley.com/press-releases/morgan-stanley-announces-10-million-to-support-national-urban-le">announced</a> $10 million in grants to support the National Urban League, aimed at supporting financial literacy, homeowner counseling and workforce development programs. The firm also <a href="https://www.morganstanley.com/press-releases/morgan-stanley-commits--5-million-to-naacp-legal-defense-and-edu">committed</a> $5 million on top of matching employee contributions to the NAACP Legal Defense and Education Fund to support its work in fighting for racial justice.</li><li>State Street&nbsp;in 2020 <a href="https://www.statestreet.com/content/dam/statestreet/documents/New_Commonwealth_Racial_Equity_and_Social_Justice_Fund_Press_Release.pdf">announced</a> a five year, $5 million commitment to the New Commonwealth Racial Equity and Social Justice Fund, which supports Black- and brown-led organizations that are working on economic empowerment, youth civic engagement, healthcare equity and criminal justice reform.</li></ul>

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Combatting Inequality

We are dedicated to combatting inequality through a series of important initiatives. These initiatives support minority owned small businesses and provide funding for community organizations that are dedicated to closing the racial wealth gap.

<ul><li>Bank of America in 2021 provided $6.6 billion to build sustainable communities, creating more than <a href="https://newsroom.bankofamerica.com/content/newsroom/press-releases/2021/02/bank-of-america-community-development-banking-provided-record--5.html">11,600 affordable housing units</a>, including 3,200 units for senior citizens, 3,400 units for formerly homeless, veterans, or those with special needs, and 5,500 certified green units. The bank also tripled its affordable homeownership initiative to $15 billion through 2027, giving homebuyers as much as $10,000 for down payments and as much as $7,500 for closing costs.</li><li>Citi in 2021 established its <a href="https://www.citibank.com/icg/sa/citicommunitycapital/">Affordable Housing Preservation Program</a>, investing more than $200 million, out of a $550 million three- year commitment to affordable housing, in five equity funds co-managed by Black investment managers to preserve multi-family rental housing. In Oregon, Citi provided a $10.0 million construction loan and a $4.7 million permanent loan for the renovation of Webster House, a 48-unit project targeting elderly households experiencing homelessness or at risk of becoming homeless.</li><li>Goldman Sachs promotes affordable housing through its <a href="https://www.goldmansachs.com/what-we-do/asset-management/impact-investing/">Urban Investment Group (UIG)</a>, a domestic, multi-asset class investing and lending business that provides capital to real estate developments and social enterprises working in underserved communities. In 2021, UIG deployed over $3 billion in community development loans in low- and moderate-income communities and created and preserved 4,617 units of affordable housing across the country.</li><li>JPMorgan Chase in 2021 <a href="https://www.jpmorgan.com/commercial-banking/insights/affordable-housing-preservation-two-years-in">announced</a> it had committed more than $13 billion in financing for over 100,000 affordable housing units as part of its Affordable Housing Preservation Program. In 2020, JPMorgan Chase announced its <a href="https://www.jpmorgan.com/commercial-banking/insights/breaking-down-barriers-to-affordable-housing---jpmorgan-chase">commitment</a> to finance 100,000 affordable housing units in underserved communities, originate 40,000 home loans for Black and Latinx households, and help 20,000 Black and Latinx households lower their mortgage payments through refinancing. The bank has also committed to originating over 40,000 home purchase loans and refinancing an additional 20,000 loans in minority neighborhoods.</li><li>Morgan Stanley, along with the National Equity Fund, in 2022 <a href="https://www.connectcre.com/stories/morgan-stanley-nef-invest-250m-in-affordable-housing-program/">committed $250 million</a> to preserve and deliver quality affordable and workforce housing at a national level. In 2021, Morgan Stanley partnered with the Metropolitan Atlanta Rapid Transit Authority (MARTA) and the National Equity Foundation to <a href="https://www.housingfinance.com/finance/partnership-launches-100-million-fund-to-preserve-housing-near-marta-stations_o">launch</a> the Greater Atlanta Transit-Oriented Affordable Housing Preservation Fund to boost MARTA’s affordable housing effort, which supports long-term preservationof affordable housing near MARTA rail stations by incentivizing and providing gap funding for owners of affordable housing.</li><li>State Street is a longtime supporter of <a href="https://www.metrohousingboston.org/about/">Metro Housing | Boston</a>, a Boston nonprofit that works with individuals and families who are homeless or at risk of losing their homes, helping them navigate available services to empower them to move along the continuum from homelessness to housing stability. In 2020, State Street in 2020 invested over $240 million in <a href="https://www.statestreet.com/values/economic-responsibilities.html">affordable housing</a> communities throughout the U.S., through the Low-Income Housing Tax Credit program. Since 2010, State Street has invested over $1.7 billion in affordable housing.</li><li>Wells Fargo in 2022 <a href="https://newsroom.wf.com/English/news-releases/news-release-details/2022/Wells-Fargo-Foundation-Aims-to-Grow-Diverse-Housing-Developers-with-40-Million-Donation/default.aspx">announced</a> Growing Diverse Housing Developers, a $40 million grant initiative focused on expanding the growth and success of real estate developers of color, including Black- and Latino-owned firms, as well as increasing the supply of affordable homes across the country. Wells Fargo also works with NeighborWorks America <a href="https://nl.wfhmconsumerevents.com/">to provide</a> down payment assistance and homebuyer education for low- and moderate-income families. In one initiative, in 2021 the bank committed to invest $5 million to help more than 300 low- and moderate-income residents in Houston with home down payment assistance.</li></ul>

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Commitment to Affordable Housing

Forum members are playing a leading role in promoting affordable housing throughout the country. In 2021 alone, Forum banks created or preserved more than 150,000 affordable housing units.

<ul><li>Recognizing the importance of a banking relationship to help narrow the wealth gap, Forum members were founding lenders in a pilot program with CFE to offer&nbsp;<a href="https://cfefund.org/project/bank-on/">BankOn accounts</a> to people across the country. More than <a href="https://2wvkof1mfraz2etgea1p8kiy-wpengine.netdna-ssl.com/wp-content/uploads/2021/07/CFE-Fund_-2021-Bank-On-100-Accts-Press-Release.pdf">100 lenders</a> big and small now offer BankOn accounts, <a href="https://www.stlouisfed.org/~/media/files/pdfs/community-development/bank-on/bankon_data.pdf?la=en">successfully</a> bringing people into the banking system.</li><li>Forum members have worked with CFE Fund and others to launch Financial Empowerment Centers in cities across the country. These centers offer free financial counseling, helping clients navigate complex financial situations and plan for the future. Additionally, the program supports strategic research projects to enhance the success of financial counseling.&nbsp;<a href="https://cfefund.org/project/financial-empowerment-centers/">Learn more</a>.</li><li>Bank of America, Citi, JPMorgan Chase, and Wells Fargo have long partnered with Cities for Financial Empowerment (CFE) to provide low-cost, low-fee checking accounts to help bring more people into the banking system.</li><li>The Citi Foundation <a href="https://www.prnewswire.com/news-releases/the-citi-foundation-and-cities-for-financial-empowerment-fund-to-increase-summer-job-opportunities-financial-education-and-banking-access-to-an-additional-140-000-young-people-301316128.html">announced</a> an additional $3.66 million in support to the CFE&nbsp;to increase summer job opportunities, financial education, and banking access to an additional 140,000 young people.</li><li>Forum members are working with the OCC on&nbsp;<a href="https://www.occ.treas.gov/topics/consumers-and-communities/minority-outreach/project-reach-fact-sheet.pdf">Project REACh</a>, a program to promote financial inclusion.&nbsp;Led by JPMorgan Chase, banks have worked to find ways to help people without traditional credit histories access credit. The banks have created a tool to import non-traditional data sources, such as deposit account activity, to allow lenders to have greater options to assess creditworthiness.</li><li>The Wells Fargo Foundation <a href="applewebdata://9AC3D0AC-44A3-42B2-AAA0-A73664A505E0/%E2%80%A2%09https:/cfefund.org/cfe-fund-and-wells-fargo-announce-third-cohort-of-bank-on-fellowship/">announced</a> a $1 million grant to CFE to increase the size of the BankOn Fellowship Program, which funds a full-time BankOn coalition leader focused on improving banking access for residents.</li></ul>

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Bringing Those Outside of Banking In

Forum members have long been on the frontlines in the effort to bring unbanked and underbanked Americans into the financial mainstream.

<ul><li>Bank of America&nbsp;has committed to spending nearly $2 billion annually with diverse businesses through its <a href="https://about.bankofamerica.com/en-us/what-guides-us/vendor-management.html#fbid=tlM4qFkwCad">Supplier Diversity program</a>.</li><li>BNY Mellon&nbsp;has established a dedicated <a href="https://www.bnymellon.com/us/en/supply-chain-responsibility-program/supply-chain-responsibility-program-statement.html">Supply Chain Responsibility program</a> to build and maintain a diverse supplier base, as well as host workshops and expos to support diverse vendor development.</li><li>Citi actively seeks diverse suppliers through minority and women business development organizations and participation in various trade show activities while utilizing diverse suppliers and consultants through their <a href="https://www.citigroup.com/citi/suppliers/who.htm">Supplier Diversity program</a>.</li><li>Goldman Sachs&nbsp;has <a href="https://www.goldmansachs.com/our-commitments/sustainability/our-vendor-program/vendor-diversity/">committed</a> to increasing spending with diverse vendors by 50 percent by 2025.</li><li>JPMorgan Chase&nbsp;has set a goal of continually exceeding $1 billion in spending with <a href="https://www.jpmorganchase.com/about/suppliers/supplier-diversity">diverse suppliers</a> each year.</li><li>Morgan Stanley&nbsp;<a href="https://www.morganstanley.com/about-us/supplier-diversity">partners</a> with supplier diversity organizations like the Women’s Business Enterprise National Council and the National Minority Supplier Development Council.</li><li>State Street&nbsp;has committed to increasing its spending with diverse suppliers over the next three years in order to strengthen Black- and Latinx-owned businesses.</li><li>Wells Fargo&nbsp;aims to spend 15 percent of its procurement budget with diverse suppliers through the bank’s <a href="https://www.wellsfargo.com/about/diversity/supplier-diversity/commitment/">Supplier Diversity program</a>.</li></ul>

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Supporting Diverse Suppliers

Our institutions are committing to partner with diverse vendors and suppliers to support minority and women-owned businesses.

We invested nearly $9 billion in Community Development Financial Institutions between 2016 and 2020.

Supporting Historically Underserved Communities

Goldman Sachs

The Best Gifts Come From Small Businesses 

The Strength and Value of the Nation's Largest Banks

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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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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, Forum Chairman

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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 & 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 & 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 & 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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