By Kevin Fromer
Originally featured in the Washington Examiner.
This week, the chief executive officers from the largest and most diversified banks in the nation will testify before Congress on the state of the American banking industry.
Members of Congress who want to know what these banks do for our country will ask what value they bring to Americans.
As their CEOs will demonstrate, these institutions are critical to our economy and play an essential role in the success of American firms doing business at home and abroad.
To have a large economy that is competitive with countries around the world, you need large banks. And, without big banks, America cannot do big things.
Each day, the Financial Services Forum’s member institutions, the eight largest and most diversified banks in the country, work with millions of consumers, businesses, investors, and communities to help advance their goals.
Our country has a diverse financial system, including over 5,000 banks of various size. The members of the Forum actually provide three-quarters of the bank funding needs of other financial institutions.
This means local community banks and insurance companies, among others, are having their borrowing needs met, in part, by large banks. In other words, the largest institutions help smaller ones serve their customers.
In addition, our institutions are a stable and strong source of credit through direct lending and financing.
They provide nearly half of all consumer loans. The American public can rely on them to help meet a variety of needs and hopes, whether it’s a car, a new home, or saving wisely for the future.
They also underwrite nearly three-quarters of all domestic debt and equity transactions, including initial public offerings. With American ingenuity at the forefront, we’re seeing more start-ups successfully develop and prepare to go public. Forum institutions have the scale and expertise to help these companies issue stock and finance their expansion, providing another key contribution to economic growth.
They are a strategic adviser and reliable lender to large and small businesses, helping to drive job creation across the country. In fact, Forum members account for 40 percent of total commercial and industrial lending provided by banks and one-quarter of all loans to small businesses on Main Street, including one-third that are less than $100,000.
And if you have ever appreciated an upgraded road on your commute to work, or a remodeled hospital that improved care, or a new school that provides our children with a safe and modern learning environment, large financial institutions are likely behind those projects. Forum institutions have about $150 billion in municipal security holdings, or government bonds, to help state and local governments fund infrastructure projects.
To ensure they can serve America’s $20 trillion economy, the largest institutions have made significant changes since the financial crisis to become far stronger financially and to strengthen their management of risk. In fact, they have surpassed the regulatory requirements for funding cushions, more than doubling liquid assets like cash and government bonds, and increasing their capital by 40 percent.
They have also proven to regulators and the public that they have the resources needed to continue lending into the economy during a downturn far worse than the financial crisis itself.
These changes, which are rightly being recognized, should give customers, investors, and taxpayers heightened confidence in America’s largest banks.
The independent Federal Reserve recently noted the vast improvements to the U.S. financial system and observed that large U.S. banks are “among the strongest in the world.”
It’s clear that the post-crisis rules bolstered the nation’s banks. The members of the Forum want to preserve and build on that progress, for the good of consumers, businesses, and society as a whole. We remain committed to a financial system that is efficient, effective, and designed to help move our nation forward.
Kevin Fromer is the CEO & President of the Financial Services Forum, an economic policy and advocacy organization whose members are the chief executive officers of the eight largest and most diversified financial institutions headquartered in the United States.