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Financial Services Forum CEO underscores costs to U.S. businesses and households of higher bank capital requirements in interview with Bloomberg TV
Washington, D.C. – Financial Services Forum President and CEO Kevin Fromer joined Bloomberg TV today to discuss a proposal to increase capital requirements for large U.S. banks. Fromer highlighted the costs of higher capital to consumers and businesses, the impact on the competitiveness of the U.S. economy, and the lack of consensus that the largest U.S. banks need more capital.
“Increasing capital at the level that is anticipated from this proposal is really a solution without a problem,” Fromer said. “There’s no justification for large increases in capital for these institutions right now and we think that policymakers are going to have to take a really hard look at this proposal to examine the costs.”
Forum CEO Kevin Fromer Discusses Capital Regulation on Bloomberg Markets Interview (Clip)
Following are highlights from the interview:
On the Cost of Higher Capital Requirements:
“It will significantly increase costs that apply to services and lending that American families and businesses rely upon,” Fromer said. “We’ve already seen reports and analysis coming from affected parties in the United States – those that are focused on housing finance, community reinvestment, American businesses that rely on banks to help hedge and manage their business activities here and abroad. Those constituencies have already identified this proposal as costing … higher prices for the very things that they rely upon the banks for.”
On the Strength of the Largest U.S. Banks and Lack of Consensus that More Capital is Needed:
“The industry has never been better capitalized,” he said. The largest banks are “strong institutions that have built up their capital and overall resiliency over the years. … We fought that last war, we won that last war. Where we are now is adopting requirements that go well beyond what we need to. And as you saw with votes on the Federal Reserve Board and the FDIC, we had dissension — we have comments that say, ‘we don’t think that this is the right way to go, we’ve got lots of questions.’ So we had consensus in past years, we don’t have consensus right now that this is necessary.”
On International Competitiveness:
“We have standards that have been agreed by the Basel Committee,” Fromer said. “The United States has decided to goldplate those standards, so we have higher capital requirements that are mandatory on the institutions. They’re higher than the ones that exist outside the United States, particularly in the EU. The proposal that we see today is going to expand that differential. It’s going to expand the disparity between very, very large U.S. institutions and their peers on the other side of the pond — same activities, same types of risks, but different capital requirements.”
Please see the Forum’s press release for more reaction to the proposal released today from the U.S. banking agencies.
To learn more about capital and the largest U.S. banks, visit smartbankcapital.com.
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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. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.