Large regional banks may be required to increase their financial cushions so they can better weather any crises that may emerge, the Wall Street Journal reported Sunday (Sept. 18).
The Journal cited anonymous sources as having said regulations under consideration would impose on large regional banks the capacity to raise funds proportional to those the largest banks are required to have at their disposal. As for how the requirements would be established, the Journal stated that the most-likely route is through Federal Reserve rule-making.
Trade groups for bankers already are gearing up to fight any new rules for the large regional institutes, the Journal reported.
Among banks that could be covered by new policies would be U.S. Bancorp, Truist Financial Group, TFC and PNC Financial Services Group, the Journal reported.
The Journal noted that in a recent speech, Fed financial regulation head Michael Barr should be more careful than they had been regarding regional banks because because “as they grow and as their significance in the financial system increases.” Barr has been in his job since July.
Lauren Anderson, senior vice president and senior associate general counsel at the Bank Policy Institute, told Bloomberg: “The agencies have yet to articulate a clear or meaningful benefit that would offset these significant costs for end users and the financial system.”
According to the Journal, regulators involved in the discussions include the Fed, the Federal Deposit Insurance Corp. and and the Comptroller of the Currency, but the full Federal Reserve Board would have to approve them before they could take effect.
Meanwhile, the Journal reported, the largest U.S. banks also could face new rules, including requirements they increase capital reserves. The Journal quoted Barr as having said at a public event that the level of capital in the banking system is strong, but, “I think the question is, is it strong enough?”
The Journal reported that some of the regulations put in place after the 2008 Global Financial Crisis spared large regional banks.
Banks that might be affected declined or did not respond to requests for comment, the Journal reported.
A lawyer who serves banks reportedly told the Journal one effect of heightening regulations is that banks explore merging so they can use scale to absorb the cost of compliance.
The close scrutiny of banks of varying sizes comes amid steady industry changes reported by PMNTS, such as heightened interest by Goldman Sachs in consumer banking.
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