Big banks are pressuring U.S. regulators to reconsider controversial rules requiring them to hold larger buffers against future losses, and this week they announced they won't get their desired result. Obtained.
Federal Reserve Chairman Jay Powell and FDIC Chairman Martin Gruenberg said Thursday they expected the rules to change following pushback from lenders, community groups, Republicans and even some Democrats. Stated.
Powell told senators Wednesday that he “hopes to see substantive and far-reaching changes” and that he would “not hesitate” to re-propose the rules if it makes sense. He reiterated the points he made to members of the House of Representatives.
“Based on the extensive comments we received, I think we can certainly expect to make changes to the final rule,” Gruenberg told reporters separately.
Concerns about capital controls, the most aggressive changes to the way banks are regulated since the aftermath of the 2008 financial crisis, are at risk of reducing access to mortgage loans for disadvantaged homebuyers from the damage they could inflict on the U.S. economy. There are many ways to reduce it.
Regulators' willingness to change what they have already proposed underscores the growing influence that big banks have in Washington and contrasts with the intense political scrutiny they faced after the 2008 financial crisis. It's spot on.
“This is a sign that the regulatory burden placed on large banks after the 2008 financial crisis may be nearing its peak,” Bank of America banking analyst Ebrahim Poonawalla said in a note. “We see this as potentially marking an important turning point.” week.
Sen. Elizabeth Warren on Thursday said Mr. Powell had reversed stricter capital controls after pledging to provide more aggressive oversight last year following the failures of several mid-sized financial institutions, including Silicon Valley banks. denounced.
“This has made you weak,” he told Powell during a Senate Banking Committee hearing.
Powell said the capital controls, known as Basel 3, were not directly related to what happened to Silicon Valley banks, and that the Fed was taking other steps to tighten its oversight of certain banks.
“You'll see that I'm doing exactly what I said I was going to do,” Powell said.
At issue is the increase in capital requirements announced last summer by Michael Barr, the Fed's vice chairman for oversight. These requirements focused on the amount of capital banks must have in reserve to protect themselves from bankruptcy.
Regulators say the proposal would increase capital levels for large banks by 16% and increase risk-weighted assets by 20%.
In the months since, banks have launched a campaign to rescind the new rules or abolish them altogether. Ahead of the comment deadline that ends on Tuesday, many banks submitted a letter to the Fed listing a number of problems with the rule.
Banks are considering litigation if the rules are not changed. JPMorgan Chase (JPM) CFO Jeremy Burnham openly discussed the possibility with reporters in January.
He said suing the bank's own regulator was “never a preferred option” but “it can't be taken off the table.”
The Banking Policy Institute, an industry group representing JPMorgan and other large banks, has reportedly hired lawyers to prepare for a lawsuit if the rules are not changed, Semaphore reported.
Kevin Frommer, president and CEO of the Financial Services Forum, one of the leading bank lobbyists, said this week he was “encouraged” by Powell's commitment.
“We agree that broad and substantive changes to the proposal are needed to avoid significant harm to the economy, businesses of all sizes, and American families,” he said.
“To achieve that, we continue to believe that a reproposal to provide the public with well-justified, data-based rules that are consistent with plans in other jurisdictions is the best approach. I believe.”
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