Source: Wall Street See
In June of this year, it was reported that the Federal Reserve was considering modifying the bank regulatory new rules, with the minimum capital increase rate lowered from the original proposal of 16% to 5%. The media reported that at the closed-door meeting last month, Powell encouraged CEOs of major US banks, such as JPMorgan, to collaborate with the Federal Reserve, urging them to submit questions to the Fed to avoid future litigation, and hinted that the Fed may independently take action to announce new regulatory proposals.
Fed Chairman Powell appears to be seeking Wall Street's endorsement of the new rules on bank capital, avoiding the milestone new regulation of implementing Basel III by the US government sparking legal battles.
On Friday, August 16, Eastern Time, media citing informed sources reported that on July 19, Powell and CEOs of a group of major banks attended a closed-door meeting. At the meeting, Powell encouraged the leaders of these large banks to cooperate with the Fed to avoid years of legal disputes over the proposal for new capital rules. The conference was hosted by the Financial Services Forum, an industry group for the largest US banks. Attendees included the CEOs of the four largest banks in the US -- $JPMorgan (JPM.US)$Please use your Futubull account to access the feature.$Morgan Stanley (MS.US)$Please use your Futubull account to access the feature.$Citigroup (C.US)$ and $Bank of America (BAC.US)$ , and Michael Barr, director of financial supervision and deputy director of the Fed in charge of designing the initial version of the new bank capital rule proposal, did not attend.
The new banking regulation proposal released by US regulators in July of last year requires banks with assets over $100 billion to increase their capital by about 16%. For the largest eight banks in the US, the requirements for capital may increase by about 19%. In June of this year, it was reported that the Fed had shown other regulatory agencies a modified plan that significantly reduced the capital requirements for large trading banks. According to the Fed's new proposal, the increase in bank capital may be reduced from the initial 16% to as low as 5%.
Media reports say that at the closed-door meeting on July 19, CEOs of large banks asked Powell whether the Fed would act independently of other regulatory agencies when disclosing key revisions and soliciting public opinion. Some attendees said that Powell left them with the impression that the Fed may take unilateral action to disclose the new regulatory proposal. Powell referred to the regulations for implementing the Basel agreement in the EU, which would increase bank capital requirements by a total of 10%.
Media reports claim that Powell's comments to banks about the capital rule proposal were described as high-level and focused on how he intends to achieve final rules and finalize partial regulations by seeking new public opinion and releasing relevant proposals that impact research. Powell told the big banks they should submit their questions to the Fed now to avoid future legal disputes.
Commentators say meetings between Powell and Federal Reserve directors and CEOs of major banks are not uncommon, but the July discussions reported in this article are a recent sign that he is trying to use his personal influence to reach consensus and push the proposal to completion.
In July, in testimony before Congress on the Fed's semi-annual monetary policy report, Powell told lawmakers that the US had made "considerable progress" in revising rules based on the Basel agreement and regulatory agencies were "very close" to making a final decision about revisions to the proposed new regulation.
Powell believed that regulators should seek more opinions on the new version of the Basel agreement proposal. After issuing the revised proposal, the Fed sought a period of public comments, which is likely to last about 60 days. He stressed that there is still some way to go before coming up with a revised proposal and refused to disclose the exact adjustments to the US version of the Basel rules, saying it may be correct to finalize the new version by early next year.
Analysts say the modified proposal mentioned by Powell is an important step, implying that the final version will not be finalized this year and its final impact will now depend on the results of the US election.
Editor / jayden