In a recent interview on Fox Business, Bank of America CEO Brian Moynihan voiced his concerns about the upcoming proposal to tighten bank capital requirements in the United States, urging regulators to apply Basel III rules carefully to maintain the worldwide competitiveness of U.S. banks.
Moynihan emphasized the need for a level playing field and cautioned against overly strict enforcement that could hamper the ability of smaller American banks to compete against their global counterparts.
The proposed measures, which U.S. banking authorities plan to announce on Thursday, will primarily target banks with $100 billion or more in assets. However, specific details regarding the scope and extent of the proposed regulations have yet to be disclosed. Moynihan warned against the unintended consequences of these rules, particularly for smaller banks with more limited resources.
Moynihan clarified that the focus should not be on the large eight banks, but rather on institutions with assets ranging from $30 billion to $100 billion. He highlighted the potential risk of these banks losing out in the competition for middle-market loans, where foreign banks or suppliers could enjoy a lower cost of capital, providing them with a competitive advantage. To preserve the vitality of these smaller financial institutions, he called for a cautious approach to implementing the capital requirements.
The CEO also spoke about recent developments in the banking industry, expressing enthusiasm for JPMorgan Chase's $2 billion mortgage portfolio acquisition from Pacwest Bancorp and Banc of California. He praised JPMorgan's involvement in the deal, describing it as "terrific" for all parties involved.
Despite the positive outlook on specific deals, Moynihan shared his bank's predictions of a "slight" recession in early 2024. He emphasized the significance of consumer power and the strength of the American economy in sustaining itself through challenging times. Optimistically, he suggested that the U.S. economy might experience a soft landing if conditions are favorable.
As the regulatory landscape evolves, Moynihan's comments serve as a timely reminder for U.S. authorities to strike a balance between ensuring the stability of the financial system and fostering an environment that allows American banks to remain competitive globally. Implementing Basel III capital rules with a careful and measured approach will be essential to preventing unintended consequences and maintaining the robustness of the U.S. banking sector.