JPMorgan and Citigroup Say Strict Capital Requirements May Limit Lending Abilities

Oct 24, 2022Banks & Credit Unions, News

Some of the biggest U.S. banks recently said that higher capital requirements that were bolstered after the 2008 financial crisis could hurt their lending abilities and amplify a possible recession. The comments came as the Federal Reserve’s new regulatory chief is reviewing bank capital requirements to potentially impose stricter rules on big regional banks.

“If you keep going and raise capital because of fear of things getting worse beyond what the risks are, you run the risk that banks will not be able to lend as much as they otherwise would to support the economy,” said Citigroup Chairman John Dugan, according to Reuters.

Bank of America CEO Brian Moynihan said that if the bank was required to increase capital by 100 basis points, that would remove $160 billion from lending possibilities. Jamie Dimon, Chief Executive Officer of JPMorgan Chase, said the bank is “sitting there with $1.2 trillion of cash, unable to finance $50 billion a year of your sovereign debt.”

The largest banks have lobbied for relief the past few years, since they face the toughest set of capital requirements. Last month, the Fed’s vice chair for supervision Michael Barr suggested that the review could ratchet up capital requirements.

“As we make judgments… it’s with an overall sense of, ‘Is capital in the system strong enough?’ It’s strong. I think the question is, is it strong enough?” Barr said at an event in September hosted by the Brookings Institution.

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