Written by Pete Schroeder
WASHINGTON, May 7 (Reuters) – Wall Street banks will press again to cut interest rates on credit card companies and major U.S. lenders as they make a last-ditch bid to win more money before the November U.S. election, four industry officials familiar with industry talks said.
The Federal Reserve in March unveiled a new draft of relaxed sweeping money rules that it estimated would reduce the amount central banks must set aside to absorb potential losses by about 4.8%, arguing the current rules are hurting the economy.
While the industry generally sees that as a victory over the central bank’s original plan for 2023, which targeted a 20% increase in capital, the gains will be uneven and a number of big banks feel they are losing out against their peers, the people said.
JPMorgan Chase, America’s biggest lender, said last month that it expects its fees to rise, while those of its rivals will fall.
Ahead of the response deadline next month, JPMorgan and other major banks such as Wells Fargo, Citigroup, Bank of America, and their trade groups, are drawing up a final wish list for corrections.
Another key issue, the people said, is the requirement under the “Basel” proposal to effectively hold cash against 10% of unused credit lines known as “unconditionally cancelable commitments,” most commonly unused credit card lines. Currently, such lines of credit are unfunded because banks can draw on them at any time, but regulators argue that lenders may not actually do so in times of economic distress because of customer relationships or other risk management measures.
Banks should benefit from a cash break on the used line of credit which is also proposed in March. But big banks will counter that the new charge could force them to lower credit card limits and cancel unused lines, the people said. Regional and small banks will not be affected because they will come under the proposed new easy money system, two of the people said.
“The sensible thing to do is to reduce the credit limits closer to their use,” said Matthew Bisanz, a partner at Mayer Brown who closely follows the proposal and said the amount of affected credit that could not be used would be “huge.”
Spokespeople for the Fed, JPMorgan, Wells Fargo, Citi and Bank of America declined to comment or did not respond to requests for comment. The sources declined to be identified because regulatory discussions are confidential.
PAYMENT BANKS ARE SURPRISED WE SURVIVED
There were about $5 billion in unused credit card lines by the end of 2025, according to Federal Deposit Insurance Corporation data, though Reuters was unable to immediately determine how much of that would be affected by the proposal.
The Basel Committee, an international body that sets monetary standards, initially proposed a new charge that was included in the 2023 plan drafted by Democratic officials at the Fed and other bank regulators under former President Biden.
After successfully fighting to delay and reduce that draft, the banks hoped that President Trump’s Republican administration would reduce or eliminate the case and were disappointed to see that it survived when they got their hands on the fine print, three of the people said.
Another key point of contention is related to the tax levied by the Fed on global significant banks or “GSIBs” in the US following the 2008 financial crisis. Those lenders have long argued that the Fed should review the inputs it uses to calculate the “GSIB surcharge,” which it set in 2015, to adjust for economic growth and accurately reflect the size of banks relative to the global economy.
The Fed last month proposed a simultaneous adjustment to account for recent economic growth and automatic revisions to future growth, but banks will again press for a return to 2015, a tweak that could significantly reduce their additional costs, two of the people said. JPMorgan Chase CEO Jamie Dimon last month called elements of the charge “absurd,” saying it penalizes the bank for its success.
Another possibility that the bank is asking will be related to the management of commercial book assets and regulatory compliance with the bank’s annual stress test, analysts said.
“A lot of banks have said, look, we think this is a great start … but there are things in the proposal that they would like to see change,” said Richard Ramsden, head of financial research at Goldman Sachs.
“For now, given how long this debate has gone on, it makes sense to focus on doing this.”
BANKS ARE STILL TRYING TO PUSH
Bankers are keen to finalize the rules before midterm elections in November that could give more power to Democrats who are skeptical of what some have said is a handout from Wall Street, three of the people said, giving lenders just months to win favorable reforms.
Fed Vice Chair for Supervision Michelle Bowman, who is leading these efforts, said she wants to finalize the proposal by the end of the year. He also told the banks that he does not expect them to use the abusive tactics they used to fight the 2023 plan, and to point out their responses, Reuters reported.
Recognizing that they may not have friendly regulators for a decade or more, the industry nevertheless plans to push for as much relief as possible, two of the people said.
“It’s an incredibly complex proposition,” Greg Baer, CEO of the Bank Policy Institute, who led the industry for the first time, told Congress last month. “I don’t even want to know how long our comment letter will take.”
(Reporting by Pete Schroeder; additional reporting by Saeed Azhar; editing by Michelle Price and Nick Zieminski)
