CONTACT: Barbara Hagenbaugh
(202) 457-8783
bhagenbaugh@fsforum.com
Proposal would increase the cost and reduce the availability of lending for consumers and businesses
Washington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today after the release of a proposal on capital requirements for the largest U.S. banks:
“With today’s proposal, the U.S. government is poised to increase the cost and reduce the availability of a wide array of services that directly support our economy, ranging from housing finance, to small business and mid-market lending, to products used by American businesses to manage risks. There is no justification for significant increases in capital at the largest U.S. banks and no other jurisdiction is likely to adopt the approach proposed today, which will only increase the significant disparity that already exists between U.S. and foreign bank capital requirements. After implementing Dodd-Frank era reforms, multiple hypothetical and real-life stress tests have shown that the largest U.S. banks can remain strong when faced with economic headwinds and continue to support the economy.
“The Federal Reserve said in its latest Financial Stability Report that the largest U.S. banks are ‘well capitalized,’ and just last month said its stress tests showed that large banks are ‘well positioned to weather a severe recession and continue to lend to households and businesses.’ Regulators and other policymakers should carefully consider the harmful economic impact of this proposal along with the demonstrated strength of the banking industry, the competitive advantage it may provide large European banks, and the movement of banking services into the nonbank sector, an already growing source of financial instability.
“While we will comment extensively on the proposal and recommend changes to avoid economic harm, we remain disappointed that the agencies are moving forward without data, analysis, or findings from the Federal Reserve’s holistic review on capital to justify such changes. The capital framework is a complicated and interconnected set of individual regulations. The public should have the ability to understand and respond to the findings of the holistic review, and to comment on specific rules in the context of other potential changes.
“Federal Reserve Vice Chair for Supervision Barr has also unilaterally decided to not recommend adjustments to the supplementary leverage ratio, despite the binding constraints it poses, the widely acknowledged contributions it has made to Treasury market dysfunction, and the announcement of the Fed Board in March 2021 to ‘soon’ issue proposals for comment.”
Go to smartbankcapital.com to learn more about the strength and resiliency of the nation’s largest banks and the costs of higher capital requirements.
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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.