“Absolutely nothing in these rules would stop your banks from making loans to working families and small businesses,” Senate Banking Committee Chairman Sherrod Brown, a Democrat, said in prepared remarks. “The reason banks might make fewer of these good loans in the future is the same reason we’ve been seeing less and less productive banking activity for years: it doesn’t make your banks as much money as the risky stuff.”
Excess Capital
The financial world has been in a heated debate over the U.S. proposals tied to what’s called the Basel III Endgame—an international overhaul initiated more than a decade ago in response to the financial crisis of 2008.
If approved by U.S. watchdogs, the rules would require big banks to increase their capital cushion by almost 20% to ensure they can survive another crunch. The Federal Reserve and other regulators say the changes can help avoid turmoil such as this year’s meltdowns of midsize banks.
Bankers note that under various rules implemented in recent years they must already hold twice as much in reserve as they did before the financial crisis. They’re now sitting on $145 billion in excess capital, which they wouldn’t be able to use under the new rules, according to Bloomberg Intelligence.
“Banks would be limited in their ability to deploy capital in the times we’re most needed, and the rule will have a harmful ripple effect on the economy, markets, businesses of all sizes and American households,” Dimon said in his comments.
This article was provided by Bloomberg News.