![]() ![]() Why it matters: Senate Democrats, especially Massachusetts Senator Elizabeth Warren, Connecticut Senator Richard Blumenthal and Illinois Senator Tammy Duckworth, have said that strengthening capital requirements is necessary to ensure the resiliency and safety of the US banking system. In an interview with CNBC on Tuesday, outgoing Morgan Stanley CEO James Gorman said he believed there were “intellectual inconsistencies,” in the soon-to-be-proposed regulation and that he would challenge and be “forceful” about what he and his bank see as wrong during the comment period. “A 10% increase in our capital levels would disable us from making about $150 billion of loans at the margin,” he said. “They’ve (officials) got to think through the downside of some of these rules,” he said, adding that the rules will decrease the competitiveness of banks and could slow the economy. ![]() ![]() “The capital in the industry is sufficient,” said Bank of America CEO Brian Moynihan on his company’s earnings call Tuesday morning. These requirements are supposed to be global, but CEOs say that they’re concerned the standards for US banks are higher than they are internationally – limiting US competitiveness abroad. And they’re not shy in speaking up about it. The change, they say, will increase the financial system’s resilience following the failures of three regional banks earlier this year.ĭimon, Barnum and other bank executives, don’t agree. Officials have said the changes could mean that banks have to hold on to as much as 20% more in capital. US regulators are preparing to release plans for a long-awaited overhaul of capital requirement rules for banks, known as the Basel III Endgame, next week. That is generally a bad thing for the real economy.” “That obviously puts pressure on us to increase prices where we can. “We think the capital increases are excessive and it puts pressure on returns,” said JPMorgan CFO Jeremy Barnum on the same call. “This is great news for hedge funds, private equity, private credit, Apollo, Blackstone,” Dimon said of the proposed regulations. Jamie Dimon, head of JPMorgan Chase, commented on the bank’s Friday earnings call that non-bank financia l rivals were “dancing in the streets” as regulators get ready to increase bank capital requirements. The CEOs of these banks seemed to take their strong earnings reports in the face of the failure of Silicon Valley Bank, tightening credit and higher interest rates as a sign that no further regulation of their industry is necessary. That’s a big shift – the sector is still down 3.4% this year, according to FactSet data. The banking sector of the S&P 500 shot up by 6.3% over the past seven days. ![]() Investors, worried about the economic atmosphere and the recent regional banking collapse, breathed a sigh of relief at the results. What’s happening: Big banks kicked off second quarter corporate reports with a bang – mostly beating analyst earnings expectations (that’s not saying too much, as the bar was set fairly low this time around.) So far, they’re largely using the opportunity to kvetch about the rules regulating their industry. Earnings season is officially underway, which means the CEOs of America’s largest banks get to update the public about the health of their firms and their economic outlooks. ![]()
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