Bank CEOs on Capitol Hill
September 26, 2022
Last week, the seven largest U.S. retail banks appeared in marathon hearings before the House Financial Services Committee and the Senate Banking Committee. The witnesses included CEOs of Bank of America, Citigroup, JPMorgan Chase, PNC, Truist, U.S. Bancorp, and Wells Fargo.
What they're saying: Overall, the hearings were a mix of bipartisan praise and criticism on a number of topics. Here are the topics most relevant for CREFC members:
- ESG: Some Republicans criticized climate goals and banks taking a position to reduce financing for oil and gas. Conversely, some progressives criticized banks for not divesting from certain industries, including fossil fuels. The CEOs emphasized their commitment to sustainability while continuing to engage in energy needs.
- Climate Regulatory Reporting: Ranking Member Pat Toomey (R-PA) questioned whether Congress authorized regulators to mandate climate reviews. While JPMorgan CEO Jamie Dimon said he personally did not think the Fed had that authority, he conceded the Fed could easily mandate banks to collect that. “They are my judge, my jury, and my hangman,” Dimon said.
- Capital Requirements: Several Republicans asked about whether capital and reserve levels were constraining lending. Several witnesses said that while their banks are very well capitalized, the impact of stress tests and the current expected credit loss (CECL) will limit the ability of banks to provide credit and liquidity.
- Nonbanks: The CEOs brought up the topic of nonbank financial institutions, including some of the possible regulatory arbitrage certain nonbanks have over regulated institutions (such as consumer mortgages). While they did not specifically urge for regulation in those spaces, they noted certain business activities need more oversight, such as when Zelle transactions are sent to nonbank accounts.
- Diversity: The banks highlighted their ongoing efforts to diversify their workforce and serve diverse customer bases. While some Democrats urged them to do more, House Financial Services Subcommittee on Diversity and Inclusion Chairwoman Joyce Beatty (D-OH) offered measured praise for the progress they have made.
The bottom line: Unlike hearings of the past, there were not calls for breaking up big banks. Rep. Pete Sessions (R-TX) was the most effusive in his praise: