UPDATE: Major Banks Raise Concerns Over New Rules With Fed's Tarullo
May 02 2012 - 4:28PM
Dow Jones News
Top executives from six major U.S. banks on Wednesday discussed
concerns over new industry regulations and the central bank's
recent "stress tests" with Federal Reserve Gov. Daniel Tarullo, the
Fed said in a summary of the meeting.
The Fed released a short summary of Tarullo's meeting, which
lasted about one hour and 15 minutes and was held at the Federal
Reserve Bank of New York.
The chief executives present included Goldman Sachs (GS) chief
executive Lloyd Blankfein, J.P. Morgan Chase & Co. (JPM) chief
executive Jamie Dimon and Bank of America Corp. (BAC) chief
executive Brian Moynihan and James Gorman, chief executive of
Morgan Stanley (MS).
The meeting partly focused on the tests of banks' financial
health conducted by the Fed in mid-March, according to the central
bank's summary. Some banks have been critical of the process,
questioning gaps between their own internal estimates of their
capital cushions and that of the central bank.
Tarullo said last month the central bank will consult with
academics, analysts and banks to improve the stress test process.
In a speech, he said "there should be some ways" for the Fed to
better explain its mathematical models to banks.
The bank executives also were critical of numerous rules
resulting from the 2010 Dodd-Frank financial overhaul. Particularly
of concern was a proposal to limit the biggest banks' exposure to
other firms and governments, which the banks contend could harm the
financial system.
They were concerned about "the extent to which the proposed
rules would overstate credit risk for certain transactions and
would establish a more stringent credit exposure limit for the
largest financial firms," the Fed said.
Tarullo told the banks that he would neither "respond or reply"
to the banks' views, according to the Fed summary.
Also attending the meeting were Richard Davis, chief executive
of U.S. Bancorp (USB) and Jay Hooley, chief executive of State
Street Corp. (STT).
The bank chief executives were also concerned about several
other aspects of Dodd Frank, the Fed said. Those include: the
so-called Volcker rule, which limits their ability to trade for
their own profit; a mandate that banks retain a portion of the risk
for assets such as mortgages that are packaged into securities; and
a provision that requires banks to stop relying on credit
ratings.
-By Alan Zibel, Dow Jones Newswires; 202-862-9263;
alan.zibel@dowjones.com
--Victoria McGrane contributed to this report.
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