After eight years of sluggish economic growth, despite the most accommodative stretch of monetary policy in the nation’s history, two trade group chiefs argued that excessive bank regulation may be to blame. In an op-ed in the Hill, American Bankers Association President and CEO Rob Nichols and Clearing House Association President Greg Baer argued that a regulatory environment largely imported from Europe has changed the role of banks in the U.S. economy.
Instead of their traditional role of converting short-term deposits into loans, U.S. banks have been forced by Basel-centric capital and liquidity rules to hold far more short-term securities and limit their lending. Under this model, a bank “can meet any depositor redemption, and its assets will always reprice along with its liabilities,” Nichols and Baer said. “But it won’t do anything to foster economic growth; indeed, it won’t really be what we think of as a bank.”
U.S. banks are stronger than ever, they added, but regulators have no apparent intention to stop the ratcheting up of capital and liquidity requirements or to revisit existing rules. “Safe and sound regulatory policy and rigorous economic growth aren’t mutually exclusive,” Nichols and Baer wrote.