Executives at JPMorgan Chase aren't happy about the prospect of the government telling them how much money they must hold over for a rainy day. The Federal Reserve is considering increasing the amount of solid capital that the largest banks must hold against losses, a measure proposed by international regulators. When banks are required to hold a higher portion of their financing as capital reserves, it reduces their relative amount of borrowing and gives them a stronger buffer, regulators say, making the financial system safer by discouraging risk and bolstering a bank's defenses.
But this extra requirement for the largest banks will hinder these institutions' ability to make loans and compete internationally, said JPMorgan chief risk officer Barry Zubrow, in prepared remarks for a Congressional hearing Thursday.
Nearly three years after the worst financial crisis since the Great Depression, a debate rages about how best to mitigate the next crisis, while still allowing banks to perform their role in financing to the broader economy. Zubrow's comments echo a sentiment expressed across the banking industry for months: that hindering the ability of banks to take risks hurts their ability to extend loans. In JPMorgan's case, the current requirements are sufficient, Zubrow said, and the bank's performance during the financial crisis should be enough proof.
"The regulatory pendulum clearly has now begun to swing to a point that risks hobbling our financial system and our economic growth," Zubrow said in his prepared testimony.
JPMorgan has been a vocal skeptic of new regulations. The firm's chief executive Jamie Dimon asked a pointed question of Federal Reserve Chair Ben Bernanke last week, expressing a fear that the host of new rules will critically hamper the financial sector. Bernanke conceded that he wasn't aware of any research that could allay Dimon's concern.
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Source: Huffington
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