According to industry executives, American banks are gearing up to revamp additional U.S. capital regulations under the anticipated Trump administration. The objectives include revising the capital surcharge imposed on global banks, reevaluating a key leverage constraint, and overhauling the Federal Reserve's annual stress tests. The lobbying plan seeks to create more favorable rules for banks by reshaping existing regulations.
Despite some deregulatory progress during President-elect Donald Trump's initial term, major U.S. banks have yet to achieve a comprehensive review of post-2008 financial crisis capital rules. These regulations require leading banks like JPMorgan Chase, Bank of America, and Goldman Sachs to reserve nearly $1 trillion collectively, a practice that banks argue is excessive and could be used for lending to stimulate the economy.
After reducing additional capital requirements from the Basel proposal and influencing adjustments to the stress test process, banks are optimistic about their chances to influence capital rules with the upcoming administration's support. David Solomon, CEO of Goldman Sachs, highlighted the potential for constructive discussions under the new administration to enhance regulatory clarity and consistency.
Following years of criticism post-financial crisis, bank executives emphasize the stability of large banks during crises like the COVID-19 pandemic. JPMorgan's CFO, Jeremy Barnum, underlines the importance of a regulatory framework that supports the economy without being automatically anti-bank.
Additionally, there is growing confidence within the industry regarding legal shifts, particularly the potential to overturn precedents that favored deference to agency interpretations. According to Washington policy analyst Ed Mills, power dynamics are shifting back towards banks following a long-term trend.
Key industry players such as Bank of America, Goldman Sachs, and JPMorgan did not comment on these developments. The industry is working closely with Republican regulators to advance a milder version of Basel regulations, aiming to reduce capital requirements further. The industry's strategy involves securing a weakened framework under the current administration to prevent stricter regulations in the future.
In conclusion, the industry's efforts to influence capital rules are gaining momentum, with potential support from appointed officials and Republican lawmakers. The goal is to implement a more favorable regulatory framework that supports economic growth and banking operations.