Chief executives from eight of the largest U.S. banks are expected to deliver a stern message to federal lawmakers on Wednesday: imposing stricter regulations on lenders will have dire consequences for the economy.
A Frequent Target
The big banks have been under constant scrutiny in Washington since the financial crisis of 2007-09. Executives have been frequently summoned to appear before the Senate Banking Committee to address industry concerns.
Focus on Basel III Endgame
This year, the spotlight is on the Basel III Endgame proposal, which calls for banks to increase their capital reserves to better safeguard against potential losses.
While the Basel III framework has been in development for years, lawmakers and regulators have intensified their efforts in recent months, particularly after the collapse of Silicon Valley Bank earlier this spring.
Stability in Turbulent Times
The largest banks, collectively known as the global systemically important banks (GSIBs), are expected to put forth their argument that they have played a crucial role in preserving stability amid sector-wide turmoil. Therefore, they believe that tougher requirements are unnecessary.
According to Kevin Fromer, CEO of Financial Services Forum, an advocacy group representing the eight largest banks, the GSIBs have been a pillar of strength during the COVID-19 pandemic and the banking crisis of 2023. They have facilitated credit for consumers and businesses of all sizes and provided billions in deposits to institutions like First Republic Bank to prevent contagion within the banking industry.
Rest assured, these banking giants will make their case loud and clear, emphasizing their vital contributions to the overall health of the economy.
Representing the Banks
On Wednesday, CEOs from the Global Systemically Important Banks (GSIBs) will be presenting before the committee. The CEOs include Jamie Dimon from JPMorgan Chase, Brian Moynihan from Bank of America, Jane Fraser from Citigroup, Charles Scharf from Wells Fargo, David Solomon from Goldman Sachs, James Gorman from Morgan Stanley, Ronald O’Hanley from State Street, and Robin Vince from BNY Mellon.
Each CEO has prepared statements amounting to a total of 103 pages, emphasizing the strength of the banking industry and its significance to the U.S. economy.
Jamie Dimon, heading the largest bank in the U.S., has been particularly critical of the Basel III proposal. Dimon argues that there is no evidence to suggest that large banks lack capital. He warns that implementing the new rules could potentially increase capital requirements for large banks by up to 25%. This would limit their ability to provide loans to households and businesses, thus causing negative repercussions throughout the economy.
Dimon goes on to highlight that such regulations could render certain banking products and services uneconomical. He predicts that many banks may cease offering these products altogether, while the ones that do continue would have to charge higher fees to compensate for the additional costs incurred.
While the Basel III proposal is expected to take center stage during the proceedings, other consumer-related issues, such as credit card late fees and swipe fees on credit card transactions, are also likely to be discussed.
Several senators, including Sherrod Brown (D., Ohio), Tim Scott (R., S.C.), Elizabeth Warren (D., Mass.), and Mike Crapo (R., Idaho), will be among the 23 committee members attending the hearing.
The Senate hearing is scheduled to begin at 9:30 a.m. ET.