US banks warned about over-regulation
The executives of various US banking entities spoke about the consequences that these measures could have
At a session of the US Senate held on Wednesday, senior executives of the country’s major banks warned about the possible adverse consequences of increased regulation of the sector, particularly in relation to the implementation of the Basel III rules proposed by the Federal Reserve.
Basel III represents an internationally agreed package of measures developed by the Basel Committee on Banking Supervision in response to the 2007-2009 financial crisis. The aim is to strengthen regulation, supervision and risk management in the banking sector.
Although the adaptation of Basel III to the US financial sector is still pending, several executives of major banks expressed concern in the Senate about the Federal Reserve’s proposal, which imposes stricter capital requirements.
Jamie Dimon, Chairman and CEO of JPMorgan Chase, warned that the proposal could “unjustified and unnecessary” increase the capital requirements of large U.S. banks by a range of 20 % to 25 %. Dimon noted that this would limit the ability of financial institutions to deploy capital at critical times, having a detrimental effect on the global economy, markets and businesses.
David Solomon, chief executive of Goldman Sachs, went even further by stating that the US proposal contradicts the essence of the Basel III Endgame rules, which are designed to set international capital standards without increasing the total amount. According to Solomon, the US proposal is “significantly stricter than any other jurisdiction” and would increase capital requirements by about 25 %.
Solomon cited statements by the Chairman of the Federal Reserve, Jerome Powell, and the Chairman of the Supervisory Board of the European Central Bank, Andrea Enria, to back up his arguments, noting that with the US rules, the requirements would be considerably higher for Europe’s systematically the largest banks, known as “G-SIBs.”
The executive also stressed that adopting this new regulation would result in an increase in credit costs for individuals and companies, exerting a negative impact on the country’s economy.
K. Tovar
Source: Telemundo
(Reference image source: Unsplash+)
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