The CEOs of America’s top banks are on Wednesday expected to speak out against plans to hike capital requirements, at a U.S. Senate banking committee hearing on regulation of Wall Street firms.
Top executives including Goldman Sachs
GS,
boss David Solomon and J.P. Morgan
JPM,
head Jamie Dimon are set to oppose the U.S. government’s planned “Basel III endgame” regulations, which seek to ensure top banks have sufficient resources to avoid potential collapse.
Those rules, proposed in July, would force banks to hold more capital, among other changes.
J.P. Morgan CEO Dimon is set to warn legislators that the proposed rules would have a harmful effect on the U.S. economy in limiting banks ability to deploy capital in forcing top lenders to hold up to 25% more capital on their balance sheets.
“Despite zero evidence that large U.S. banks are undercapitalized today, the proposed Basel III Endgame rule, if enacted, would unjustifiably and unnecessarily increase capital requirements by 20-25% for the largest banks,” Dimon is expected to say.
“Banks would be limited in their ability to deploy capital in the times we’re most needed, and the rule will have a harmful ripple effect on the economy, markets, businesses of all sizes and American households.”
The Basel III framework was designed by the G10’s Basel Committee on Banking Supervision, with a view to strengthening regulation of big banks in the wake of the 2008 financial crash. The Basel III endgame is set to see the final implementation of the Basel II regulatory push.
Goldman Sachs chief David Solomon is set to warn that the U.S. plans will see it adopt “significantly more stringent” rules than in “any other jurisdiction,” in a shift that could hinder the American banking sector’s competitiveness.
Solomon will also warn that the new Basel III rules could lead to higher levels of inflation, by increasing the cost of providing debt to customers including manufacturers, food producers and energy companies.
Dimon will, in turn, warn that the more stringent capital requirements could render certain services unprofitable, in a shift that would see banks stop offering those services and pile into less-regulated markets instead.
“Many banks will simply stop offering certain products and services, and those that do will have to charge more for them just to make it worth the service,” Dimon is set to say.
Morgan Stanley
MS,
CEO James Gorman is set to call the proposed Basel III endgame rules “wholly unnecessary” while warning it “will make credit more expensive and less accessible to consumers and businesses.”
The collapse of Silicon Valley Bank in March has led to calls for higher capital requirements to be imposed on banks to ensure they are protected against the possibility of ultra-fast bank runs driven by the pace at which money can be withdrawn in the digital age.
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