Banks will urge the Federal Reserve on Tuesday to completely review a draft rule regulating bank capital.in the latest stage of Wall Street’s efforts to dilute the so-called “Basel proposal”, which, according to bankers, will harm the economy.
Comments on the standard and two other important bank capital and long-term debt projects that aim to reinforce the safety and soundness of the banking system are due to be presented on Tuesday.
The deadline offers banks a key opportunity to try to reshape the Basel proposalwhich they have fought fiercely with pressure groups and public advertising campaigns and in the media.
“The imminent avalanche of negative comments should strengthen the case for a more comprehensive change or a new proposal”Isaac Boltansky, director of policy research at brokerage BTIG, wrote on Saturday.
While it is rare for the Fed to change rules, it is not unprecedented. A Fed spokesman declined to comment. The agency’s vice president of supervision and main architect of the rule, Michael Barr, has said that last year’s banking crisis shows that additional capital is necessary to protect against unforeseen impacts.
The rule, first introduced in July, recalibrates the way banks calculate the amount of cash they must set aside to cover risks.
Banks: “unnecessary” and “onerous” rule
The entities claim that it is unnecessary, since the sector is already flooded with capital, and what is so onerous that it will harm products and services ranging from green loans and pension plan services to commodity hedging and Treasury market liquidity.
“I hope it is completely revised,” Jane Fraser, CEO of Citigroupduring an earnings conference call on Friday, adding that it would hurt competitiveness and push lending toward shadow banks.
In an unusual move, banking groups representing Citi, JPMorgan Chase & Co and Bank of America, among others, they were ahead of the deadline and warned the Fed in a public letter on Friday that the rule would violate federal laws because it does not justify why the changes are necessary.
JPMorgan Chief Financial Officer Jeremy Barnum told the media that litigation “can’t be ruled out when it comes to something this serious,” but that it is not his preferred route.
Source: Ambito
