The chief executives of major U.S. banks are contending that banking regulations aimed at strengthening the country’s financial system will instead harm the economy, making credit tough, increasing the costs of mortgage loans and other bank products. During a hearing at the Senate Committee on Banking, Housing and Urban Affairs, Jamie Dimon, CEO of JPMorgan Chase & Co., the largest U.S. bank, urged lawmakers to consider the cumulative impact of proposed capital rules on “affordable credit and traditional banking products, capital markets and market liquidity, and the economy overall”. Dimon and other bank executives also supported more regulations on cryptocurrency and agreed that cryptocurrency brokers should be subject to the same regulations as banks under the Bank Secrecy Act, which is designed to prevent terrorists and drug traffickers from using the financial system to fund their activities. Dimon said he’s “always been deeply opposed to crypto” and called for lawmakers to crack down on cryptocurrency transactions by terror groups and rogue nations.

Regarding changes in bank regulations, Dimon warned that a proposed cap on interchange fees could make bank accounts more expensive for lower-income borrowers.

Citigroup Inc. CEO Jane Fraser said the bank is forecasting a recession but sees no “drastic downturn” on the horizon despite persistent inflation in services, rising debt, a slowdown in global growth, and wars in the Middle East and Europe.

Citigroup Inc. CEO Jane Fraser stated that “consumers appear to be taking a more cautious approach to spending in recent months, reflected in moderate sales growth, a shift in spend choices and segment differentiation”.

Goldman Sachs Group Inc. CEO David Solomon warned that the proposed capital rules will increase the bank’s capital requirements by 25% and nearly double the capital needed for market-making activity. He further added that “these higher requirements are simply layered on top of the global market shock … without any consideration for how they interact, resulting in a significant double count”.

Solomon also criticized the “punitive” regulatory measures, stating that they may harm U.S. competitiveness and capital-markets activity around the globe and push activity overseas and to the private-banking space without making the system safer.

Bank of America Corp. CEO Brian Moynihan said that the bank has maintained its “responsible growth” effort despite “the challenging economic and geopolitical environment that continues in 2023.” Some of the efforts across the bank include eliminating nonsufficient-fund fees and reducing overdraft fees to $10 from $35.

State Street Corp. CEO Ronald O’Hanley, Bank of New York Mellon Corp. CEO Robin Vince, and Morgan Stanley CEO James Gorman also testified.

Sherrod Brown, Democrat from Ohio, chaired the Senate committee, which includes ranking Republican member Tim Scott of South Carolina. Brown concluded that since the banks are all able to achieve the higher capital requirements, “leads me to conclude they’re not too onerous”.

Scott, however, said that just because banks may be able to hold more capital, it may not be the best path forward for the economy.

Brown also asked Wells Fargo’s Scharf about unionization efforts at the bank. Scharf said the bank believes it’s best if it has a direct relationship with its employees and that it intends to exercise its right to speak to employees.

The new capital requirements, known as the Basel III endgame rules, have attracted opposition from Democrats and Republicans; they both expressed their own concerns about the end effects of the new banking rules, which will raise capital requirements for all U.S. banks and strengthen oversight of banks with more than $100 billion in assets under management.

It’s interesting that the rules definitely include the large and the smaller banks, after the failures of Silicon Valley Bank, Signature Bank and First Republic Bank earlier this year.