US bank CEOs warn against new regulation

The CEOs of major US banks have warned that new regulations could harm the economy. The chief executives (CEOs) of major US banks have warned that a new regulatory proposal for the banking sector, which envisages increasing bank capital, could harm the economy. The chief executives of JPMorgan Chase, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, State Street and BNY Mellon attended the "Annual Oversight of Wall Street Companies" hearing held at the US Senate Committee on Banking, Housing and Urban Affairs. The chief executives of these banks warned about the potential risks of new regulatory proposals for the banking sector, including the US Federal Reserve's (Fed) plan to increase the capital requirements of large banks, at this year's hearing. Bank executives, who opposed the new regulatory proposal known as the "Basel III Endgame" on the grounds that it could affect their profitability, argued that the regulation would reduce lending and weaken banks' balance sheets at a time when the sector needs more flexibility. JPMorgan Chase CEO Jamie Dimon said in his speech at the session that the proposed regulation would fundamentally change the US economy "in ways that the Fed has not reviewed or considered." Dimon stated that "despite no evidence that large banks are undercapitalized," the proposed regulation, if enacted, would increase capital requirements for large banks by 20-25 percent in an "unfair and unnecessary" manner. Dimon pointed out that banks' ability to allocate capital when they need it most would be limited, and that the proposed regulation would have a negative impact on the economy, markets, businesses of all sizes, and American households. Morgan Stanley CEO James Gorman also emphasized that the impact of the proposed regulation, which imposes additional capital requirements on banks, on the US economy and consumers should be taken into consideration. Gorman described the capital increases for large US banks, which are currently subject to rigorous stress tests every year and are required to hold additional specific capital buffers, as "completely unnecessary." The proposed regulation would make credit “more expensive” and less accessible to consumers and businesses, Gorman said, adding that it would also harm the competitiveness of the U.S. economy and bring more activity to less regulated parts of the financial services sector. The chairman of the U.S. Senate Banking, Housing and Urban Affairs Committee, Democratic Senator Sherrod Brown, criticized banks for aggressively lobbying against regulations and said that banks were overly concerned with the potential negative impacts of the rules in order to protect their profit margins. While the banking sector has been struggling this year due to rising interest rates in the face of high inflation in the U.S., three banks in the country, Silicon Valley Bank, Signature Bank and First Republic Bank, went bankrupt. Following the bankruptcy of these banks, U.S. President Joe Biden called for strengthening rules for banks to reduce the likelihood of bank failures again and protect American jobs and small businesses.