WASHINGTON (Reuters) -U.S. regulators unveiled a sweeping overhaul Thursday that would direct banks to set aside billions more in capital to guard against risk.
If fully implemented, the proposal would raise capital requirements for large banks by an aggregate 16% from current levels, with the brunt felt by the largest and most complex firms, regulators said. Here are key quotes about the proposal:
FINANCIAL SERVICES FORUM CEO KEVIN FROMER
“There is no justification for significant increases in capital at the largest U.S. banks.”
“Regulators and other policymakers should carefully consider the harmful economic impact of this proposal along with the demonstrated strength of the banking industry, the competitive advantage it may provide large European banks, and the movement of banking services into the non-bank sector.”
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS IN NEW VERNON, NEW JERSEY
“This is a very long process and any instant reaction to it is probably misplaced.”
“This is probably close to the worst case of what it could be. But there’s going to be a long period of negotiation and politics before implementation … It’s somewhere between two and four years away.”
MAYRA RODRIGUEZ VALLADARES, MANAGING PRINCIPAL OF MRV ASSOCIATES
“Unfortunately, they do not go far enough in order to measure operational risk, market risk, and even to a certain extent credit risk.”
“Big banks are still allowed to use very complex models that only a minority of people really understand. And so there’s still a lot of flexibility for banks to understate their level of risk, especially in the area of operational risks,” she said.
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION CEO KENNETH BENTSEN
“Regulators have failed to provide justification for such an increase in capital requirements for the trading book, particularly given how resilient U.S. markets have been since the Global Financial Crisis.
“Imposing a punitive capital charge on businesses that provide steady fee income is misguided.”
ANA ARSOV, MANAGING DIRECTOR OF FINANCIAL INSTITUTIONS AT MOODY’S INVESTORS SERVICE
“Proposed increases in regulatory capital requirements for banks with assets greater than $100 billion are credit positive in the long-term.”
“However, these banks may incur higher near-term costs to achieve these requirements and also will require time to transition to higher capital levels. Generating capital organically may prove more challenging given profitability headwinds related to higher bank funding costs, the inverted Treasury curve and likely asset quality deterioration in the quarters ahead.”
BANK OF AMERICA CEO BRIAN MOYNIHAN, ON FOX BUSINESS
The process needs to assure “the playing field is level,” and rules should be implemented carefully so they do not “make the U.S. less competitive.”
ANDY DUANE, ATTORNEY AT POLUNSKY BEITEL GREEN”Raising capital requirements could see regional banks shift away from mortgage lending. Even larger bank lenders could continue to retreat from mortgage lending or impose sharp increase in fees passed along to borrowers.”
“With potential borrowers already facing record high interest rates, steep home prices, and supply-chain issues; increased fees and scarcity of bank lenders could be another brick in the wall stopping Americans from obtaining meaningful homeownership and wealth creation.”
BANK POLICY INSTITUTE CEO GREG BAER “Today’s proposal would unnecessarily increase the amount of required capital for banks, with resulting harm for consumers and small businesses and a continued migration of financial activity into unregulated parts of the financial sector.”
“The dramatic capital increases proposed today reflect a bad deal cut in Basel without public transparency or Congressional input, with an addition of unnecessary layers of capital solely for banks operating in the United States. A proposal of this magnitude requires a robust and thorough economic analysis, which this one lacks.”
(Reporting by Pete Schroeder and Matt Tracy in Washington, Tatiana Bautzer and Nupur Anand, Sinead Carew in New York; editing by Lananh Nguyen and Nick Zieminski)
