(L-R) Brian Moynihan, Chairman and CEO of Bank of America; Jamie Dimon, Chairman and CEO of JPMorgan Chase; and Jane Fraser, CEO of Citigroup; testify during a Senate Banking Committee hearing on the Hart Senate Office Constructing on December 06, 2023 in Washington, DC.
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Wall Street CEOs on Wednesday pushed back against proposed regulations geared toward raising the degrees of capital they’ll must hold against future risks.
In prepared remarks and responses to lawmakers’ questions during an annual Senate oversight hearing, the CEOs of eight banks sought to boost alarms over the impact of the changes. In July, U.S. regulators unveiled a sweeping set of upper standards governing banks often called the Basel 3 endgame.
“The rule would have predictable and harmful outcomes to the economy, markets, business of all sizes and American households,” JPMorgan Chase CEO Jamie Dimon told lawmakers.
If unchanged, the regulations would raise capital requirements on the biggest banks by about 25%, Dimon claimed.
The heads of America’s largest banks, including JPMorgan, Bank of America and Goldman Sachs, are searching for to dull the impact of the brand new rules, which might affect all U.S. banks with at the least $100 billion in assets and take until 2028 to be fully phased in. Raising the associated fee of capital would likely hurt the industry’s profitability and growth prospects.
It will also likely help nonbank players including Apollo and Blackstone, which have gained market share in areas banks have receded from due to stricter regulations, including loans for mergers, buyouts and highly indebted corporations.
While all the main banks can comply with the principles as currently constructed, it would not be without losers and winners, the CEOs testified.
Those that may very well be unintentionally harmed by the regulations include small business owners, mortgage customers, pensions and other investors, in addition to rural and low-income customers, in keeping with Dimon and the opposite executives.
“Mortgages and small business loans might be dearer and harder to access, particularly for low- to moderate-income borrowers,” Dimon said. “Savings for retirement or college will yield lower returns as costs rise for asset managers, money-market funds and pension funds.”
With the rise in the associated fee of capital, government infrastructure projects might be dearer to finance, making latest hospitals, bridges and roads even costlier, Dimon added. Corporate clients might want to pay more to hedge the worth of commodities, leading to higher consumer costs, he said.
The changes would “increase the associated fee of borrowing for farmers in rural communities,” Citigroup CEO Jane Fraser said. “It could impact them by way of their mortgages, it could impact their bank cards. It could also importantly impact their cost of any borrowing that they do.”
Finally, the CEOs warned that by heightening oversight on banks, regulators would push yet more financial activity to nonbank players — sometimes known as shadow banks — leaving regulators blind to those risks.
The tone of lawmakers’ questioning in the course of the three-hour hearing mostly hewed to partisan lines, with Democrats more skeptical of the executives and Republicans inquiring about potential harms to on a regular basis Americans.
Sen. Sherrod Brown, an Ohio Democrat, opened the event by lambasting banks’ lobbying efforts against the Basel 3 endgame.
“You are going to say that cracking down on Wall Street goes to harm working families, you are really going to assert that?” said Brown, who chairs the Senate Banking Committee. “The economic devastation of 2008 is what hurt working families, the uncertainty and the turmoil from the failure of Silicon Valley Bank hurt working families.”