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Large US banks warn of negative effects of higher capital requirements

Large US banks warn of negative effects of higher capital requirements

Managers of the greats American banks They warned this Wednesday in the Senate of USA of the negative effects that the adaptation in this country of the Basel III standards prepared by the Federal Reserve and that would mean greater capital requirements for the entities.

Basel III is a set of internationally agreed measures that the Basel Committee on Banking Supervision developed in response to the 2007-09 financial crisis and seeks to strengthen the regulation, supervision and risk management of banks.

Its adaptation to the sector in USAHowever, it is still pending, and several executives of the large banks expressed their concern in the Senate about the proposal prepared by the Federal Reserve and which involves greater capital requirements.

The president and chief executive officer of JPMorgan ChaseJamie Dimon warned that the proposal “would increase unjustifiably and unnecessarily” the capital requirements of large US banks between 20 and 25%.

This would cause, he added, that the entities would see “limited” its ability to deploy capital when it is most needed.

For the manager, the norm would have “a damaging domino effect on the economy, markets and businesses around the world” and “in the economy, markets, businesses of all sizes, and American households.”

Furthermore, Dimon assured that “none of the proposed changes would have effectively prevented the collapse of the Silicon Valley bank.”

The executive director of Goldman SachsDavid Solomon, went further to point out that the Basel III Endgame standards “They were designed to create a common set of international capital standards without raising the aggregate amount of capital,” but the American proposal “does exactly the opposite.”

“It is significantly stricter than any other jurisdiction and would increase our capital requirements by approximately 25%,” said about the application in the United States.

He added that the Chairman of the Federal Reserve, Jerome Powell, recognized this issue in his statement on the Basel proposal, and also cited the Chairman of Federal Reserve Supervision. European Central BankAndrea Enria, who stated that “(with US standards) the requirements would be significantly higher for “G-SIBs”the systematically largest banks in Europe.

He insisted that assuming this new rule would increase the costs of credit for individuals and companies and would have a negative impact on the country’s economy.

During question time, other managers joined in the criticism. The executive director of Bank of AmericaBrian Moynihan, warned that increasing capital requirements are a “reduction in the ability of this industry to serve its customers.”

Republican Senator Mike Rounds asked all those involved – eight executives from large banks – to raise their hands on several occasions if they thought that increased regulation could negatively affect first-time home buyers, those saving for a pension. or the farmers of the country. Almost everyone raised their hand each time.

Source: Gestion

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