CONTACT:&nbsp;Barbara Hagenbaugh(202) 457-8783bhagenbaugh@fsforum.com&nbsp;ICYMI: Unintended Consequences of Higher Bank Capital Could Lessen U.S. Financial StabilityFormer Federal Reserve governor warns Basel III Endgame would further shift activity to the shadow banking sector.Washington, D.C. – The Basel III Endgame proposal to substantially raise capital requirements for the nation’s largest banks would accelerate the migration of bank activity to the less regulated, non-bank sector, former Federal Reserve Governor Randall Kroszner warned in an op-ed published in American Banker.“Since the Global Financial Crisis, I and others have expressed significant concerns about migration of bank activity to the non-banks,” said Kroszner, currently the Norman R. Bobins Professor of Economics at the University of Chicago Booth School of Business. “As I describe in a recently published <a href="https://www.federalreserve.gov/SECRS/2024/February/20240209/R-1813/R-1813_020724_158313_294423925299_1.pdf">paper</a>, I am concerned that a proposal from the U.S. banking regulatory agencies called the Basel III Endgame will accelerate this migration to non-banks that face less, if any, regulation and supervision.”&nbsp;“The agencies provided only a very broad qualitative assessment of the proposal’s costs and benefits and did not provide thorough analyses supporting their conclusions that the benefits of the proposal outweigh its costs,” Kroszner continued. "[Regulators] should undertake a cost-benefit analysis of the proposed revisions. Otherwise, some groups could be disproportionately adversely affected, and investment and therefore economic growth could suffer."Read the full op-ed <a href="https://livearticles.net/arizent/2468598.html">here</a>. A fact sheet regarding Dr. Kroszner’s paper is available <a href="https://fsforum.com/a/media/kroszner-b3e-key-takeaways.pdf">here</a>. &nbsp;&nbsp;Go to smartbankcapital.com to learn more about the strength and resiliency of the nation’s largest banks and the costs of higher capital requirements.&nbsp;###&nbsp;The Financial Services Forum is 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. Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. Visit our website:&nbsp;<a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X&nbsp;<a href="https://twitter.com/fsforum">@fsforum</a>&nbsp;and&nbsp;<a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

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Despite the demonstrated strength of the largest U.S. banks, the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, on split votes, issued a proposal in July 2023 to increase capital requirements. The proposal offers no reason or justification for material increases in capital requirements and would harm American households, businesses, and the broader economy. 

Given the complexity of the proposal, its many and significant negative impacts, and the lack of evidence in support of its changes, the agencies should repropose the rule and include the motivations, data and analysis that demonstrate the need for proposed changes.


Basel 3 Endgame 

ICYMI: Unintended Consequences of Higher Bank Capital Could Lessen U.S. Financial Stability

CONTACT: Brigid Richelieu(202) 660-2569bhagenbaugh@fsforum.com&nbsp;&nbsp;Financial Services Forum Statement on 2024 Stress Test Scenarios“The nation’s largest banks are strong, highly capitalized and resilient.”Washington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today after the Federal Reserve released the scenarios for its annual bank stress tests:“The nation’s largest banks in the post-Dodd-Frank era are strong, highly capitalized, and an important source of support to American households and businesses, even in the face of significant economic headwinds. Multiple hypothetical stress tests, as well as the real-life stress tests of the pandemic and last year’s banking turmoil, have shown that the largest U.S. banks can – and do – act as a bulwark for the economy and the financial sector.“This marks the 15th year since the Federal Reserve began to administer stress tests to gauge the health of the largest U.S. banks. The stress test scenarios released today reflect a continuation of the highly rigorous standards applied to the largest banks. U.S. Global Systemically Important Banks (GSIBs) have more than tripled their capital levels over the past 15 years. And GSIB capital requirements are increasing each year regardless of any rule changes.“The stringent regulatory capital framework in place and strong GSIB capital levels reinforce that additional significant capital increases, such as those in the Basel III Endgame proposal, are not justified and would harm American households, businesses, and the broader economy.“Further, elements of the Basel III Endgame proposal would duplicate the stress test exercise, imposing unnecessary costs on companies, savers, investors, and the overall economy.“For example, the stress tests include a global market shock, which stresses market-making activity, such as when banks assist private companies to go public, finance municipal infrastructure projects, fund companies through bond offerings, or ensure businesses and individuals can responsibly hedge their risks. Savers also use markets to find a liquid and valuable store of value for their hard-earned savings. The stress tests also account for operational risk losses, such as when a bank sustains damage to bank branches in a severe hurricane. Even though such elements are already subject to required capital calculated in the stress tests, the Basel III Endgame proposal would impose another capital requirement based on the same activities captured in the stress tests. Such redundancy is bad policy and bad for American companies and families.”Additional Background:Forum members since 2008 have more than tripled their common equity Tier 1 capital, which acts as a cushion against sudden financial losses, to over $900 billion. U.S. bank capital requirements, meanwhile, continue to increase and are higher than that required of foreign banks around the globe.&nbsp;The Federal Reserve conducts stress tests, a simulation to determine a large financial institution’s ability to support the economy even when faced with an economic crisis, at least once a year.&nbsp;Since 2012, total hypothetical stress test losses calculated by the Federal Reserve have ranged from 6.3 percent to 25 percent of aggregate Tier 1 capital for the eight U.S. GSIBs, demonstrating that Forum members maintain substantial capital to sustain losses as severe as those contemplated in the stress tests.Go to&nbsp;<a href="https://smartbankcapital.com/">smartbankcapital.com</a>&nbsp;to learn more about the strength and resiliency of the nation’s largest banks and the costs of higher capital requirements.&nbsp;###&nbsp;The Financial Services Forum is 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.&nbsp; Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on <a href="https://www.threads.net/@finservforum">Threads</a>&nbsp;and&nbsp;<a href="https://www.instagram.com/finservforum/">Instagram</a>

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Each year, the Federal Reserve tests the ability of large banks to continue to support the economy even in the face of a severe recession far worse than that experienced during the financial crisis.

Multiple hypothetical stress tests, as well as the real-life stress tests of the pandemic and the 2023 regional banking turmoil, have shown that the largest U.S. banks can – and do – act as a bulwark for the economy and the financial sector.

Stress Tests

Financial Services Forum Statement on 2024 Stress Test Scenarios

January 16, 2024&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proposed Increases in Capital Surcharges for Largest U.S. Banks UnwarrantedGSIB surcharge proposal based on outdated methodology and further widens disparity between U.S. and international rules&nbsp;Washington, D.C. – Proposed changes to the capital surcharge rule for the 8 U.S.-based Global Systemically Important Banks (GSIBs) are expected to lead to increased capital requirements and do not address the use of outdated methodology for calculating the requirements, the Financial Services Forum said Tuesday.Responding to a proposal from the Federal Reserve Board to adjust the GSIB surcharge framework, the Forum in a joint comment letter supported some of the changes, but noted the proposal would lead to even greater capital requirements for the largest U.S. banks without clear justification for those increases from the agency.The Forum emphasized the need for the Federal Reserve to account for economic growth and inflation in the calculation of the GSIB surcharge. The Fed has failed to review and adjust the calculation of the surcharge to reflect the inflationary effects of overall economic growth, as it <a href="https://www.govinfo.gov/content/pkg/FR-2015-08-14/html/2015-18702.htm">indicated it would</a> when the GSIB surcharge rule was enacted in 2015. Since that time, the surcharges for U.S. GSIBs have increased in large part due to economic growth and inflation, which in no way suggests heightened systemic risk.&nbsp;Additional hikes in U.S. GSIB surcharges would widen even further the gap in rules between U.S. and foreign jurisdictions and make the United States even further out of step with international capital accords agreed to in Basel, Switzerland.“The excessive stringency of the U.S. standard in both the proposal and the current approach worsen, rather than improve, international capital discrepancies, hurting U.S. economic competitiveness and undermining the Basel Committee objective of enhanced comparability,” the Forum said.Capital acts as a cushion against losses. The GSIB surcharge is an additional capital buffer required of the 8 U.S GSIBs. Since 2009, U.S. GSIBs have more than tripled their high-quality capital to approximately $928 billion and have acted as a source of support, including during the pandemic and regional banking crisis. In the Federal Reserve’s annual stress test review of capital adequacy <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230628a.htm">last year</a>, the Fed said large banks were “well positioned to weather a severe recession and continue to lend to households and businesses.”Foreign jurisdictions have implemented surcharges for their GSIBs at a lower level than U.S. regulators.“The preexisting and proposed divergences from the Basel framework are not in service of American interests—rather, they would impose additional requirements on U.S. GSIBs that would harm the American economy and the ability of U.S. GSIBs to compete internationally,” the Forum said.&nbsp; “Similarly, the potential increases in required capital that would result from the proposal would exacerbate the movement of financial activity outside the regulated banking system, threatening consumers and financial stability.”The Forum supported some of the proposed changes, including the narrowing of the “bands” for the GSIB scores as well as using quarter-end averages rather than relying on December 31 as a single datapoint for calculating surcharge requirements.The Forum’s full comments can be found <a href="https://fsforum.com/a/media/fsf---gsib-surcharge-comment-letter.pdf">here</a>.&nbsp;###&nbsp;

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The Forum supports a review of the GSIB surcharge, a capital requirement that was agreed to internationally, but that U.S. regulators have implemented in a manner that places higher requirements on U.S. banks than that required of foreign competitors. 

Federal regulators have failed to review and adjust the calculation of the surcharge to reflect the inflationary effects of overall economic growth, as they indicated it would when the GSIB surcharge rule was enacted in 2015. Since that time, the surcharges for U.S. GSIBs have increased in large part due to economic growth and inflation, which in no way suggests heightened systemic risk.


GSIB Surcharge 

Proposed Increases in Capital Surcharges for Largest U.S. Banks Unwarranted

CONTACT: Barbara Hagenbaugh(202) 457-8783bhagenbaugh@fsforum.com&nbsp;&nbsp;Basel III Endgame Proposal Would Harm American Households, Businesses, and the Broader Economy&nbsp;Capital proposal would cost the economy more than $100 billion annually, increase capital requirements for the nation’s largest banks by 30 percent inclusive of GSIB surcharges&nbsp;Washington, D.C. – &nbsp;The Basel III Endgame proposal to increase capital requirements for the nation’s largest banks would harm the American economy, undermine U.S. competitiveness, and weaken financial stability, the Financial Services Forum said Tuesday.Responding to the Basel III Endgame proposal, which would vastly increase capital requirements for the U.S.-based global systemically important banks (GSIBs), the Forum criticized the proposal’s lack of justification for increasing capital requirements and emphasized the substantial economic impacts it would have on the broader economy.The Forum estimated that the increase in required capital would cost the economy more than $100 billion annually.“Increasing capital is not free,” Forum President and CEO Kevin Fromer said to the Federal Reserve Board, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. “The costs of the proposed changes would inevitably be borne by American families and business. The largest banks are already well capitalized. This proposal would impose enormous burdens with little or no marginal benefits.”The Forum’s comments included an analysis that found that, inclusive of proposed changes to the GSIB surcharge, the proposal would increase required capital for U.S. GSIBs by 30 percent, greater than the percentage increase estimated by the agencies. Required capital would rise by 25 percent due to the endgame proposal itself and by 5 percent because of the GSIB surcharge proposal.“The proposal offers no reason or justification for material increases in capital requirements,” Fromer said. “To the contrary, the strength and resilience of the largest banks has been well established and put to work for the good of the American economy through a pandemic and the resulting period of economic challenge, including a series of regional bank failures that Forum members helped contain. This proposal fails to recognize the strength of our system and the costs of excessive, unwarranted regulation.”&nbsp; &nbsp;&nbsp;In addition, the proposal would weaken the competitive position of U.S. banks, their customers and the economy. The United States has applied more stringent capital requirements to its GSIBs than international standards call for and greater than other jurisdictions require of their GSIBs. While the U.S. proposal would result in a 25 percent increase, the same international standard will result in an increase of 3.2 percent for U.K. banks and 5.6 percent for EU banks. The U.S. proposal inexplicably goes beyond the international standard and includes other changes that would further disadvantage American businesses, which operate in, or export into overseas markets. The Basel III Endgame was intended to achieve comparable requirements across jurisdictions, not to materially increase required capital. The U.S. proposal is wholly inconsistent with these objectives.Adoption of the proposal would also exacerbate the movement of banking services outside the regulated banking system, undermining consumer protections and weakening financial stability.Given the complexity of the proposal, its many and significant negative impacts, and the lack of evidence in support of its changes, the agencies must repropose the rule and include the motivations, data and analysis that demonstrate the need for proposed changes.&nbsp;The Forum’s comments can be found <a href="https://fsforum.com/a/media/fsf---b3e-comment-letter.pdf">here</a> and an accompanying fact sheet can be found <a href="https://fsforum.com/a/media/key-takeaways-from-the-financial-services-forum's-comments-to-regulators-on-the-b3e-proposal.pdf">here</a>.&nbsp;###&nbsp;The Financial Services Forum is 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.&nbsp; Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. &nbsp;Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Basel III Endgame Proposal Would Harm American Households, Businesses, and the Broader Economy

CONTACT: Brigid Richelieu(202) 660-2569brichelieu@fsforum.com&nbsp;&nbsp;Proposed Changes to Long-Term Debt Requirements Would Impair Market Liquidity &nbsp;Rule intended to address resolvability of some banks would unnecessarily distort existing market for long-term debt, Forum says&nbsp;Washington, D.C. – Agencies’ long-term debt (LTD) proposal would severely distort the existing LTD market, the Financial Services Forum said Tuesday, while supporting the proposal’s exclusion of its member institutions’ bank subsidiaries for certain requirements given the significant progress to their resiliency and resolvability.The Forum responded to a proposal from the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation that would newly require certain banks and bank holding companies to issue minimum amounts of long-term debt. The proposal would also revise certain LTD requirements to which Forum members are already subject at the holding company level.The Forum’s letter offered several key observations and recommendations regarding the proposal to mitigate LTD market distortions. Specifically, the Forum urged regulators not to impose any minimum denomination requirement on LTD securities, as it would result in a less liquid, less diverse and more concentrated investor base. Additionally, the Forum cautioned against extending the LTD haircut requirement to minimum Total Loss-Absorbing Capacity (TLAC) requirements. By applying an additional haircut to TLAC requirements, the Federal Reserve would essentially require some U.S. GSIBs to raise additional capital.The Forum supported the proposal’s position not to extend internal LTD requirements to bank subsidiaries of U.S. GSIBs. &nbsp;&nbsp;“The proposal’s treatment appropriately recognizes the steps our member institutions have taken since the global financial crisis of 2008 to enhance their resilience and resolvability, obviating the need for a separate internal LTD requirement for their bank subsidiaries,” Forum President and CEO Kevin Fromer said.&nbsp;The Forum’s full comments can be found <a href="https://fsforum.com/a/media/fsf---ltd-proposal-comment-letter.pdf">here</a>.&nbsp;###&nbsp;The Financial Services Forum is 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.&nbsp; Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

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The nation’s largest banks are subject to the most stringent liquidity standards among U.S. banks. These standards ensure that the largest U.S. banks have sufficient liquid resources, such as cash, to meet liquidity needs such as when customers withdraw money from their accounts. Since 2009, the U.S. GSIBs have tripled their liquid assets, allowing them to remain strong and continue to lend and support the economy in the face of headwinds.

Liquidity 

Proposed Changes to Long-Term Debt Requirements Would Impair Market Liquidity  

CONTACT: Barbara Hagenbaugh(202) 457-8783bhagenbaugh@fsforum.com&nbsp;Highlighting Concerns on Basel III EndgameWashington, D.C. – A number of individuals and organizations have raised concerns with the Basel III Endgame proposal. One week ahead of the comment deadline, we highlight some of those concerns that have been raised thus far in comment letters:<h4><a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-135.pdf">California Public Employees’ Retirement System (CalPERS)</a></h4>“There are unintended consequences in the Proposal. … The Proposal would punish CalPERS – and its two million beneficiaries – because it does not issue publicly traded debt securities. That error should be remedied.”<h4>&nbsp;<a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-121.pdf">American Farm Bureau Federation, National Council of Farmers, and other farm groups</a></h4>“We are very concerned that any contraction in the availability of clearing services will have a disproportionate impact on agricultural end-users that are far outside the major financial centers, especially smaller entities such as grain elevators and family farms. We urge you to modify the proposals so that they do not disincentivize banks from providing this important service to their customers.”<h4>&nbsp;<a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-131.pdf">Business Roundtable</a></h4>"The impact of this proposal is understated and will impede the ability of America's banks to provide a range of critical financial services to Business Roundtable member companies, reducing both innovation and economic growth.”<h4>&nbsp;<a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-123.pdf">Committee on Capital Markets Regulation</a></h4>“A more robust analysis is needed. As the Committee has previously argued, a rigorous cost-benefit analysis showing that the economic benefits of a proposed rule will outweigh its economic costs should be a prerequisite for rulemakings by federal regulatory agencies.”<h4><a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-141.pdf">Liberty Latin America</a></h4>“The imposition of burdensome regulations on counterparties to commercial end-users, who are engaged in simple risk management, may have a significant negative impact on companies like ours, as we operate in the global economy. Because these large banking organizations act as capital markets intermediaries, sources of credit, underwriters of corporate debt and equity securities, and liquidity providers, the Proposals will adversely impact US banking institutions, as well as their end-users. Further, the discrepancies between the Proposals and those adopted by the EU and the UK create a scenario where commercial end-users may be compelled to conduct derivatives transactions with banking institutions beyond the regulatory scope of the US.”<h4>&nbsp;<a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-137.pdf">Whalen Global Advisors Chairman R. Christopher Whalen</a></h4>“This proposal reflects a view of financial risks facing US banks that is decades out of date and ignores the public record regarding bank failures.”<h4>&nbsp;<a href="https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-regulatory-capital-rule-large-banking-organizations-3064-af29-c-007.pdf">American Council on Renewable Energy, and other organizations</a></h4>“The treatment of tax equity in the proposed capital requirements is both unwarranted and particularly detrimental to [Inflation Reduction Act]-incentivized projects.”&nbsp;Go to<a href="https://smartbankcapital.com/"> smartbankcapital.com</a> to learn more about the strength and resiliency of the nation’s largest banks and the costs of higher capital requirements.###The Financial Services Forum is 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.&nbsp;Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Highlighting Concerns on Basel III Endgame 

CONTACT: Barbara Hagenbaugh(202) 457-8783<a href="mailto:bhagenbaugh@fsforum.com">bhagenbaugh@fsforum.com</a>&nbsp;Forum CEO: Analysis Shows Excessive Cost of Capital Proposal“The U.S. proposal will harm our economy and competitiveness”Washington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today following comments by the Federal Reserve vice chair for supervision in which he discussed the banking agencies’ Basel 3 Endgame proposal, which would significantly hike capital requirements:“This proposal would vastly and unjustifiably increase capital requirements, harming U.S. businesses, consumers, and the broad economy. Capital isn’t free. Higher capital requirements lead to increased costs and reduced availability of lending for consumers and businesses, with those impacts felt by all Americans.“As the Forum and other banking trade organizations recently <a href="https://fsforum.com/news/required-gsib-capital-increase-would-far-exceed-government-estimates">announced</a>, capital requirements for the 8 U.S.-based Global Systemically Important Banks, or GSIBs, would increase by more than 30 percent, the combined effect of the proposed Basel 3 Endgame and increased GSIB capital surcharges, significantly higher than the agencies’ estimates.“The U.S. proposal also departs from and exceeds the international Basel standards, further widening the disparity between U.S. and other large financial institutions. European banks subject to Basel 3 Endgame are expected to face increased requirements in the single digits.&nbsp; &nbsp;“Numerous consumer groups, policy experts, and business organizations have <a href="https://smartbankcapital.com/in-the-news/">argued</a> that the proposal would harm consumers and businesses across the country and weaken American competitiveness at a time when policymakers are trying to avert a U.S. recession. These and other concerns should be addressed and the agencies should repropose this rule.”&nbsp;Go to <a href="https://smartbankcapital.com/">smartbankcapital.com</a> to learn more about the strength and resiliency of the nation’s largest banks and the costs of higher capital requirements.###&nbsp;The Financial Services Forum is 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.&nbsp;Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. Follow us on X <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

Forum CEO: Analysis Shows Excessive Cost of Capital Proposal

CONTACT: Brigid Richelieu(202) 457-8766<a href="mailto:brichelieu@fsforum.com">brichelieu@fsforum.com</a>&nbsp;Required Bank Capital Increase Would Far Exceed Government EstimatesAnalysis shows capital requirements for the largest U.S. banks would increase 30 percent&nbsp;Washington, D.C. – Capital requirements for the 8 U.S.-based Global Systemically Important Banks, or GSIBs, would increase 30 percent following implementation of an international capital accord in the United States, the Financial Services Forum, American Bankers Association, Bank Policy Institute, and Securities Industry and Financial Markets Association said <a href="https://fsforum.com/a/media/associations-letter-re-b3e-impact-on-u.s.-gsibs.pdf">in a letter</a> to banking regulators.The U.S. banking agencies in their Basel 3 Endgame proposal estimated the increase in required capital for the GSIBs plus one other bank would be 19 percent while risk weighted assets under the proposal would increase by 24 percent. An analysis by the Forum found that required capital for the U.S. GSIBs would increase by 30 percent – required capital would rise by approximately 25 percent due to the endgame proposal itself and by roughly an additional 5 percent as a result of increased GSIB surcharges – while risk-weighted assets, which are the basis for risk-based capital requirements, would increase 33 percent.“These capital and risk-weighted asset increases are markedly higher than those provided in the proposal, demonstrating that the agencies have materially underestimated the proposal’s impact,” the trade associations said in a letter&nbsp;to the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.The banking agencies’ estimates relied on outdated data and were calculated based on the Basel agreement, not on the U.S. proposal, which goes above and beyond the international accord. The Forum used 2023 data in its analysis and considered the impact of the rule as proposed in the United States. Further, the analysis incorporated expected increases in GSIB surcharges.“The final rule, and any assessment of the proposal’s impact on capital, must be informed by up-to-date data pertaining to the proposal itself, and we believe it must also take into account all components of the agencies’ regulatory capital framework,” the trades said.The regulators should release the results of its quantitative impact study, which would be based on data due to the banking agencies on January 16, 2024. The agencies then should repropose the rule to give commenters time to consider the impact of the rule in light of the new information.More detailed information on this data and the broader impacts from the Basel III proposal will be included in the forthcoming comment letters from the trade groups.Media contacts:Financial Services ForumBrigid Richelieu, 202-660-2569American Bankers AssociationJosh Britton, 202-663-7553 &nbsp;Bank Policy InstituteAustin Anton, 202-589-2410Securities Industry and Financial Markets AssociationLindsay Gilbride, 202-962-7390&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;###&nbsp;About the Financial Services ForumThe Financial Services Forum is 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. Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.About the American Bankers AssociationThe American Bankers Association is the voice of the nation’s $23.4 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $18.6 trillion in deposits and extend $12.3 trillion in loans.About the Bank Policy InstituteThe Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.About the Securities Industry and Financial Markets AssociationThe Securities Industry and Financial Markets Association is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry's one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit <a href="http://www.sifma.org">http://www.sifma.org</a>.&nbsp;Updated January 16, 2024, to reflect updated data

Required Bank Capital Increase Would Far Exceed Government Estimates

CONTACT: Barbara Hagenbaugh(202) 457-8783bhagenbaugh@fsforum.com&nbsp;ICYMI: Reuters – “UK lenders face smaller impact from Basel rules than rivals”U.S. economy to be at an even bigger competitive disadvantage after finalization of Basel 3 Endgame capital rules&nbsp;Washington, D.C. – The Bank of England this week announced that UK banks will see a much smaller increase in capital requirements after implementation of the Basel 3 Endgame package than U.S. banks, Reuters reported.“The BoE said it estimates the impact of the final leg of Basel on UK banks will be ‘low’ at an average increase in Tier 1 capital of about 3.2% once fully phased in by January 2030, down from an estimated 6% increase last year as data is refined,” author Huw Jones <a href="https://www.reuters.com/business/finance/uk-lenders-face-smaller-impact-basel-rules-than-rivals-boe-says-2023-12-12/">wrote</a>." ‘This is lower than the European Banking Authority’s estimate of a Tier 1 increase of around 10% in the EU and the US agencies’ estimate of a CET 1 increase of around 16% for US firms,’ the BoE said.”Capital requirements for the eight U.S. Global Systemically Important Banks, or GSIBs, are expected to increase by more than 20 percent. U.S. GSIBs <a href="https://fsforum.com/news/u-s-vs-european-capital-adequacy-the-increasingly-unlevel-playing-field-unfolding-in-basel-iii-finalization">already have</a> substantially larger risk-based capital requirements than European banks.&nbsp;<figure class="image image_resized" style="width:75%;"><img src="https://fsforum.com/a/media/screen-shot-2023-05-03-at-7.37.47-pm.png"><figcaption>Source: Federal Reserve Y-9C, Company Annual Reports</figcaption></figure>Higher capital requirements lead to reduced availability of credit and higher borrowing costs.The United States historically has gone far beyond international agreements when implementing capital accords, leading to a gulf between U.S. requirements and those for banks around the world. That makes it more expensive and more difficult for U.S. companies to borrow and to compete overseas.To learn more, go to <a href="https://smartbankcapital.com/">smartbankcapital.com</a>&nbsp;Full Reuters story:REUTERS: UK lenders face smaller impact from Basel rules than rivals, BoE says By: Huw Jones &nbsp;LONDON, Dec 12 (Reuters) - The Bank of England said on Tuesday that implementing the final leg of the global Basel bank rules will increase capital requirements at UK banks by 3%, far less than for their European Union and U.S. peers.Regulators began rolling out the tougher capital rules after the global financial crisis of 2007-09 when taxpayers had to rescue ailing banks.Britain, the EU, U.S. and other countries are now finalising how they will implement the final leg of the so-called Basel III capital standards, tailoring them to local circumstances.The BoE published on Tuesday the first of two <a href="file:///C:/Users/8003243/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/I0N0RNEZ/News%20release%20-%20The%20PRA%20publishes%20the%20first%20of%20two%20policy%20statements%20for%20the%20implementation%20of%20the%20Basel%203.1%20standards.pdf">"</a>near final<a href="file:///C:/Users/8003243/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/I0N0RNEZ/News%20release%20-%20The%20PRA%20publishes%20the%20first%20of%20two%20policy%20statements%20for%20the%20implementation%20of%20the%20Basel%203.1%20standards.pdf">"</a> policy statements on implementing the Basel rules, saying it had made some tweaks to its original proposals following a public consultation.The BoE said it estimates the impact of the final leg of Basel on UK banks will be "low" at an average increase in Tier 1 capital of about 3.2% once fully phased in by January 2030, down from an estimated 6% increase last year as data is refined."This is lower than the European Banking Authority’s estimate of a Tier 1 increase of around 10% in the EU and the US agencies’ estimate of a CET 1 increase of around 16% for US firms," the BoE said.U.S. banks have mounted a heavy lobbying campaign against the Federal Reserve's proposals for implementing Basel, which follow several bank failures, including Silicon Valley Bank, earlier this year."The rules published today implement the latest Basel standards in the UK and include appropriate adjustments to take on points raised by respondents to our consultation," BoE Deputy Governor Sam Woods said in a statement.Britain and the United States have said they will begin rolling out the final phase of Basel III in mid-2025, with the EU, which has already finalised its Basel rules containing several temporary waivers, starting in January 2025 but with longer phase-ins.Markets industry body AFME said it will be important to coordinate the timeline for implementing Basel internationally to avoid harming the UK’s competitiveness.The BoE said its alterations boost competition by narrowing the advantage big banks have in using their own models to calculate capital buffers, over the more conservative norms for smaller lenders, to make capital ratios more comparable.More substantive changes are expected in a second policy paper in the second quarter of next year covering a minimum capital "floor" for lenders that use their own calculation models, which is expected to cut the capital hit further."The second statement, due out in Q2 next year, will be much more important for firms’ ability to boost the UK’s economic growth through lending," said Simon Hills, director of prudential policy at UK Finance, a banking industry body.Tuesday's statement includes an interim capital regime that small, domestic focused banks can apply as an alternative to Basel.&nbsp;&nbsp;###&nbsp;The Financial Services Forum is 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. Forum member institutions are a leading source of lending and investment in the United States and serve&nbsp;millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system. Visit our website: <a href="http://www.fsforum.com/">fsforum.com</a>Follow us on X <a href="https://twitter.com/fsforum">@fsforum</a> and <a href="https://www.linkedin.com/company/financial-services-forum/">LinkedIn</a>

ICYMI: Reuters – “UK lenders face smaller impact from Basel rules than rivals”

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State Street Corporation

Ron is chairman and chief executive officer of State Street Corporation. He is also a member of State Street Corporation’s Board of Directors. Ron was previously president and chief operating officer of State Street Corporation, and before that president and chief executive officer of State Street Global Advisors, the investment management arm of State Street Corporation. He joined State Street in 2015. Prior to State Street, Ron was president of Asset Management &amp; Corporate Services for Fidelity Investments, responsible for all Fidelity asset management organizations and Fidelity’s corporate functions and enterprise technology. He served at Fidelity from 2010 to 2014. Prior to joining Fidelity, Ron served as president and chief executive officer of BNY Mellon Asset Management in Boston, a position to which he was named in 2007. During this time, he also served as vice chairman of Bank of New York Mellon Corporation and was a member of its Executive Committee. Additionally, Ron oversaw all of Bank of New York Mellon’s activities in Asia. Prior to the 2007 merger of Bank of New York and Mellon, he was vice chairman of Mellon Financial Corporation and president and chief executive officer of Mellon Asset Management. He served at Mellon and Bank of New York Mellon from 1997 to 2010. Prior to Mellon, Ron was with McKinsey &amp; Company, Inc., from 1986 to 1997 and was elected a partner in 1992. He founded the Investment Management practice worldwide and was co-founder and co-leader of the firm’s North American Personal Financial Services practice. Additionally, he was a member of the Worldwide Property &amp; Casualty Insurance practice. During his tenure with McKinsey, Ron served in the firm’s Boston, New York, and Stockholm offices. Ron received his Bachelor of Arts degree in political science from Syracuse University in 1980 and his Master of Business Administration from Harvard Business School in 1986. Ron serves on the boards of Unum Corp. and Rhode Island Commerce Corporation. He also serves on the boards of Beth Israel Lahey Health, The Boston Foundation, IYRS School of Technology and Trades, Syracuse University and WBUR. Ron’s philanthropic and civic interests include corporate governance, retirement/healthcare policy and funding, education, and climate. He has led several initiatives on gender equality. Ron is a frequent speaker and writer, and an avid offshore sailboat racer.

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Ronald O'Hanley

State Street Corporation Chairman And Chief Executive Officer, Forum Chair

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Citigroup

Jane Fraser is the Chief Executive Officer of Citi, the world's most global bank, serving millions of consumers, businesses and institutions across 160 countries and jurisdictions. She is the first female CEO in the firm’s history. Jane has deep experience across Citi’s consumer and institutional businesses and, in many ways, she helped shape Citi into the company it is today. Before becoming CEO in February 2021, she was President of Citi and CEO of the Global Consumer Bank, responsible for all of Citi’s Consumer businesses, including Retail Banking and Wealth Management, Credit Cards, Mortgage and Operations and Technology in 19 markets. Before that, she was the Chief Executive Officer of Citigroup Latin America from 2015 to 2019. From 2013 to 2015, she was the Chief Executive Officer of the U.S. Consumer and Commercial Banking and CitiMortgage. From 2009 to 2013, Jane served as the Chief Executive Officer of Citi's Global Private Bank. Prior, Jane was the Global Head of Strategy and Mergers &amp; Acquisitions for Citi from 2007 to 2009. She joined Citi in 2004 in the Corporate and Investment Banking division. Before joining Citi, Jane was a Partner at McKinsey &amp; Company. She started her career at Goldman Sachs in the Mergers &amp; Acquisitions department in London and then worked for Asesores Bursátiles in Madrid, Spain. Jane serves as a Board Member for the Business Roundtable and the Council on Foreign Relations. She is Vice Chair for the Partnership for New York City and a member of Harvard Business School’s Board of Dean’s Advisors, the Stanford Global Advisory Board and the Economic Club of New York. Jane has an M.B.A. from Harvard Business School and an M.A. in economics from Cambridge University. She is married with two children.

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Jane Fraser

Citigroup Chief Executive Officer, Forum Vice Chair

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Bank Of America

Brian Moynihan leads a team of more than 200,000 employees dedicated to making financial lives better for people, companies of every size, and institutional investors across the United States and around the world.

Bank of America is recognized as a top employer by Working Mother magazine and Military Times. The company is also listed on Fortune magazine’s list of the Best Workplaces for Diversity and the Best Workplaces for Parents. It was also named one of the Best Places to Work for Disability Inclusion by the U.S. Business Leadership Network and the American Association of People with Disabilities. In 2018, Euromoney recognized Bank of America as the World’s Best Bank and the World’s Best Bank for Diversity and Inclusion, as part of their annual Global Awards for Excellence. Bank of America was also named the 2019 Catalyst Award winner, honored for supporting the continued development, empowerment and advancement of women in the company and around the world.

Moynihan participates in several organizations that focus on economic and market trends, including the World Economic Forum International Business Council, the Financial Services Forum, the Bank Policy Institute (chair), the Business Roundtable, and the American Heart Association CEO Roundtable (co-chair). He is also a member of the Federal Advisory Council of the Federal Reserve Board.

Moynihan leads the company’s Global Diversity and Inclusion Council and is a member of the museum council for the Smithsonian’s National Museum of African American History and Culture. Moynihan is also a member of the Brown University Corporation’s Board of Fellows and the Congressional Medal of Honor Foundation Board.

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Brian Moynihan

Bank Of America Chairman Of The Board And Chief Executive Officer

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BNY Mellon

Robin Vince is President and Chief Executive Officer of BNY Mellon and a member of its Board of Directors. Previously, he was Vice Chair of BNY Mellon and CEO of Global Market Infrastructure. In that role, he oversaw BNY Mellon’s Clearance and Collateral Management, Treasury Services, Markets and Execution Services and Pershing businesses.

Prior to joining BNY Mellon in October 2020, Robin was the Chief Risk Officer of Goldman Sachs and a member of the Management Committee. He joined Goldman Sachs in 1994 and held many leadership roles, including Treasurer, Head of Operations, Head of Global Money Markets, COO of the EMEA region and CEO of Goldman Sachs International Bank, among others. He served on several key subsidiary boards and governance committees. He was named managing director in 2002 and partner in 2006.

Robin is a member of National Geographic Society's Hubbard Council and serves on the Board of Advisors of The Hospital for Special Surgery.

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Robin Vince

BNY Mellon Chief Executive Officer

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The Goldman Sachs Group, Inc.

David Solomon is Chairman and Chief Executive Officer and a member of the Board of Directors of The Goldman Sachs Group, Inc.

Previously, he was President and Chief Operating Officer and prior to that, he served as Co-Head of the Investment Banking Division from 2006 to 2016. Before that, Mr. Solomon was Global Head of the Financing Group, which includes all capital markets and derivative products for the firm’s corporate clients. He joined Goldman Sachs as a Partner in 1999.

Mr. Solomon is a member of the Board of Trustees of Hamilton College and serves on the board of The Robin Hood Foundation.

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David Solomon

The Goldman Sachs Group, Inc. Chairman and Chief Executive Officer

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JPMorgan Chase & Co.

Jamie Dimon is Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co., a global financial services firm with assets of $2.5 trillion and operations worldwide. The firm is a leader in investment banking, financial services for consumers, small business, commercial banking, financial transaction processing and asset management.

Dimon became CEO on January 1, 2006 and one year later also became Chairman of the Board.  He was named President and Chief Operating Officer upon the company’s merger with Bank One Corporation on July 1, 2004. Dimon joined Bank One as Chairman and CEO in 2000.

Dimon began his career at American Express Company.  Next, he served as Chief Financial Officer and then President at Commercial Credit, which made numerous acquisitions and divestitures, including acquiring Primerica Corporation in 1987 and The Travelers Corporation in 1993. Dimon served as President and Chief Operating Officer of Travelers from 1990 through 1998 while concurrently serving as Chief Operating Officer of its Smith Barney Inc. subsidiary before becoming co-Chairman and Co-CEO of the combined brokerage following the 1997 merger of Smith Barney and Salomon Brothers.  In 1998, Dimon was named President of Citigroup Inc., the global financial services company formed by the combination of Travelers Group and Citicorp.

Dimon earned his bachelors degree from Tufts University and holds an MBA from Harvard Business School. He serves on the boards of directors of a number of non-profit institutions including the Clearing House and Harvard Business School. Additionally, he is the Chairman of the Business Roundtable and serves on the executive committee of the Business Council and the Partnership for New York City, and is a member of the Financial Services Forum, Financial Services Roundtable and Council on Foreign Relations.

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Jamie Dimon

JPMorgan Chase & Co. Chairman And Chief Executive Officer

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Morgan Stanley

Edward (Ted) Pick is the Chief Executive Officer of Morgan Stanley.Before becoming CEO in 2024, Mr. Pick served as Morgan Stanley's Co-President, Co-Head of Firm Strategy and Head of the Institutional Securities Group, overseeing Investment Banking, Equities, Fixed Income, Global Capital Markets and Research.&nbsp;In previous roles, Mr. Pick was Global Head of Sales and Trading, engineering a turnaround of the firm’s Fixed Income Division. As Head of Institutional Equities, he led that business to a leading global position. He also served as Head of Equity Capital Markets, helping the firm actively raise capital during the financial crisis.&nbsp;Mr. Pick joined Morgan Stanley in 1990 and was promoted to Managing Director in 2002. He is a member of the firm’s Board of Directors (2024), Operating Committee (2012), Management Committee (2008) and Morgan Stanley-MUFG Steering Committee (2013).Mr. Pick graduated Phi Beta Kappa from Middlebury College (1990) and received an MBA from Harvard Business School (1994). He is a Trustee at the Metropolitan Museum of Art (2018), and serves on the MET’s Nominating &amp; Governance Committees. Mr. Pick is Chair of the Advisory Board for the Morgan Stanley Alliance for Children’s Mental Health and a board member of the Institute of International Finance.

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Ted Pick

Morgan Stanley Chief Executive Officer

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Wells Fargo & Company

Charles W. Scharf is chief executive officer and president, and a member of the Board of Directors of Wells Fargo &amp; Company. A financial services veteran with 24 years of experience in leadership roles in the banking and payments industries, Charlie served as chief executive officer of Bank of New York Mellon from July 2017 to October 2019 and the chairman of its board from January 2018 to October 2018. He also was chief executive officer and a director of Visa Inc. from October 2012 to December 2016. During his tenure at Bank of New York Mellon, Charlie demonstrated a strong track record in initiating and leading change, driving results, strengthening operational risk and compliance, and innovating amid a rapidly evolving digital landscape. As the CEO of Visa, Charlie transformed the firm into a technology-driven digital commerce company by partnering with the world’s leading technology companies to drive new payment experiences and introduce new technologies to improve payment system security. Previously, he was a managing director of One Equity Partners at JPMorgan Chase &amp; Co. and chief executive officer of Retail Financial Services at JPMorgan Chase. He also was chief executive officer of the retail division of Bank One Corp., chief financial officer of Bank One Corp., chief financial officer of the Global Corporate and Investment Bank division of Citigroup, and chief financial officer of Salomon Smith Barney and its predecessor company. Charlie earned a Bachelor of Arts degree from Johns Hopkins University and an MBA from New York University. He is a director of Microsoft Corporation, serves on the board of trustees of Johns Hopkins University, is a member of The Business Council, and is chairman of the New York City Ballet. He lives in New York City.

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